Trade Voice: CILA's Malcolm Hyde on the importance of a united front

On 23 March 2020 most of us watched a ministerial broadcast in which the UK Prime Minister said citizens would face fines if they failed to comply with the government’s new instructions to stay at home and that we could only leave our home for a select few reasons.

More then 128,000 deaths later in the UK – and 3.9 million worldwide* – with relief we are following a roadmap out of lockdown. The aftermath of this pandemic surely must respect those who have lost their lives and those who have lost loved ones, often without the opportunity to be with their loved ones as they were dying.

In the midst of personal loss and tragedy we are all only too aware of the fallout of the Financial Conduct Authority’s business interruption case, which compared to the staggering loss of life may appear trivial but was of huge significance for the insurance sector.

On the positive side, the FCA case brought about clarity and greater certainty. During the period of uncertainty our CILA members were very much in the firing line. Chartered Loss Adjusters who were presenting claims to insurers were under considerable pressure with the life blood of so many businesses in their hands.

On the other side loss adjusters representing insurers had to wrestle with differing opinions, and insurers’ reliance on the Orient-Express Hotels Ltd v Assicurazioni Generali case.

The FCA’s case with regard to the trends clause and causation was founded on the principle that the Orient Express case had been decided incorrectly. The Supreme Court agreed. In essence there were concurrent causes of the loss of income – a local outbreak and the pandemic. The insurers’ argument was based on the Orient Express case and was in effect that “but for” the local event businesses would not have suffered the loss. However, “but for” the general lockdown the businesses would have suffered the same loss even had there been no local event.

This was in line with the decision in the Orient Express case where a hotel was damaged in a hurricane but insurers refused the BI claim saying that had the hotel not been damaged the hotel’s business would have still been affected to the same degree.

The Supreme Court saw things differently and recognised concurrent causes both of which met the “but for” test. Neither were excluded and, therefore, insurers had a policy liability.

It is to insurers’ credit that they welcomed the FCA case to remove uncertainty and have set about paying claims in what is now in effect a surge situation. A tangible effort to collaborate and assist businesses.

The British Insurance Brokers Association conference held online this year had several fantastic sessions where collaboration was high on the agenda. Cila’s Business Interruption Special Interest Group chair Damian Glynn of Sedgwick was party to the discussion concerning the FCA test case and advocated the benefits of synergy by being united. Undoubtedly Damian was seen as one of if not the leading business interruption expert underlining the appropriateness of his authorship of the latest edition of Riley, the leading business interruption text book.

So as we welcome a more joined-up world where we can meet physically, we should learn to enhance our united approach to support professionalism and the insurance industry, and listen first to understand and ensure that no one is left on mute.

*Correct at time of writing