Regulator says insurers should pay legal bills for customers’ business interruption cases

Insurance companies should pay the legal costs of customers who challenge refusal to pay out on business interruption claims, the Central Bank say.

In updated guidance, the regulator said that where cover and related issues are disputed, the Central Bank expects firms to pay the reasonable costs of customer plaintiffs in agreed test case litigation. The most high profile of such cases at the moment involves claims taken by four publicans against FBD, that are representatives of hundreds of similar claims. FBD last week increased its estimate for the likely costs in relation to the actions from €22m to €30m.

Where customers have an entitlement to claim under a business interruption insurance policy, the Central Bank expects that claims will be processed and paid promptly and fully.

The Central Bank said that some business interruption insurance policies provide cover for the circumstances of interruption related to the outbreak of COVID-19, while others clearly do not. And in some cases the position is unclear but a strong or reasonable argument can be made that they do provide cover.

Director General of Financial Conduct, Derville Rowland, said: “The Framework reiterates our core message to firms: that they honour valid claims in full and pay them promptly.”

“Furthermore, where cover is disputed and businesses have pursued litigation, insurance firms should be cognisant of the significant costs burden faced by their customers. We therefore expect that in circumstances where the firm obtains the benefit of a court’s interpretation of issues at hand, a firm should agree to pay the reasonable costs of customer plaintiffs in agreed test case litigation and should not seek its costs against these plaintiffs.”

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