Statement: High Court Judgement of Business Interruption Insurance Test Cases

The Central Bank has prioritised dealing with the impact of COVID-19 on the financial system and on consumers. In our COVID-19 and Business Interruption Insurance Supervisory Framework, we set out our expectations for insurers’ handling of COVID-19 related business interruption insurance claims. Consistent with the Central Bank’s approach to all aspects of financial regulation, we expect firms to adopt a customer-first approach to the resolution of issues.

The framework clearly sets out our expectations of firms for the fair treatment of customers, including:

• That they honour valid claims and pay them promptly;
• Where there is doubt about the meaning of a term, the interpretation most favourable to the customer should prevail; and
• Where legal action results in an outcome that has a beneficial impact for similar customers, firms are required to take urgent action to ensure those customers benefit from the final outcome.

These core expectations have been emphasised with insurers throughout our extensive supervisory engagements with them since these issues first emerged. Furthermore, we made clear that they should pay the reasonable costs of customers in agreed test court cases that seek to determine issues for wider groups of customers.

The Central Bank’s supervisory approach is centred on identifying all groups of impacted policies where, in the view of the Central Bank, the relevant contractual provisions provide cover for COVID-19 related interruption and/or interference to businesses. Our analysis and supervisory engagement is industry-wide, with a view to identifying and addressing potentially systemic issues of breaches of legal and regulatory obligations and/or customer harm across groups of customers.

In that context, the Central Bank welcomes the judgement of the High Court in respect of the test case on Business Interruption Insurance. We will be closely examining the potential impact of this judgement for customers in the context of our sustained and ongoing engagement with relevant firms.

Notes

On 5 August 2020 the Central Bank published its COVID-19 and Business Interruption Insurance Supervisory Framework (PDF 958.98KB). The purpose of the Framework is to seek the identification and early resolution of issues arising from the interpretation of policy wordings by firms, and to ensure clarity for affected businesses as quickly as possible.

On 27 March 2020 the Central Bank wrote to all insurance firms (PDF 81.12KB) to outline its expectations in relation to Covid-19. In this letter firms were advised that “Regulated firms have an obligation to act honestly, fairly and professionally in the best interest of consumers and to comply with the Central Bank's Consumer Protection Code and other regulatory requirements. The national measures introduced to combat the COVID -19 virus have been introduced in the public interest and the Central Bank expects that the insurance industry will play its part in protecting its customers during this extraordinary time, to be sensitive to the difficult situation in which many find themselves, and to take steps to support them. The challenges posed are unprecedented and will require a swift yet carefully considered approach to achieve the right outcome for customers."