Thu Aug 6 2020

Responding to the publication today by the Central Bank of its Business Interruption Insurance Supervisory Framework, Brokers Ireland said it was a welcome development that the CBI had intervened and recognised the need for its supervisory role to be exercised regarding this significant issue for businesses.

Cathie Shannon, Director of General Insurance at the organisation, which represents 1,250 Broker firms, said: “The FCA in the UK took action at a much earlier stage, bringing a test case against eight insurers, aimed at interpreting a range of policy wordings common in the UK market. This test case also had input from several groups of affected policyholders, particularly those in the hospitality sector. The hearing of the FCA test case has now concluded and a judgment is expected as early as September 2020. The UK has, as a result of this regulatory intervention, a significant headstart over Ireland, not only in addressing the issue of COVID-19 business interruption claims, but in doing so in an efficient and cost-effective fashion for affected policyholders. This is a hugely significant issue for so many Irish businesses that this attempt by the Regulator to bring some clarity has to be welcomed.

She said that the expectation that insurance companies would pay reasonable legal costs of test cases in disputes was a positive development, given that policies are written by insurers.

Generally speaking, there is a significant divergence in firepower between insurers and those they insure. This is not just in terms of financial weight, but also arising from the fact that it is insurers that draft the policy wordings, which businesses must accept if they want to be insured. Moreover, and importantly, it is also insurers that make the decisions on policy response”.


On this basis, we believe it is fitting that the Central Bank would insist that where the parties agree that the case in question is a test case, that might benefit a wider group of policyholders, then the costs should be paid by the insurer.  Indeed the Consumer Protection Code also recognises this.  Legal costs may be a significant potential deterrent to some businesses.


Ms Shannon said it was in everyone’s best interest that the issue of cover for business interruption arising from the Covid-19 pandemic would be clarified sooner rather than later. She said “it is the case that very many business interruption policies clearly do not respond. However, for those policies and policyholders in respect of which there is a lack of clarity on how the policy should respond, it is not in anyone’s interest that significant legal costs be incurred if this may be avoided”.



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