COVID-19: Central Bank of Ireland Sets Out How Insurers Should Approach Claims
A recent letter from the Central Bank to insurance firms will provide some comfort for customers.
Many businesses which have been forced to close as a result of COVID-19 will have already contacted their insurers and will have carefully examined their policies of insurance to see what, if any, cover they might have for business interruption. While some businesses will clearly be covered by their policy, information coming from the insurance industry has given cause for concern for others.
Issues of concern for insurance customers
In a recent statement on the issue, Insurance Ireland has pointed out that some business interruption policies may only cover loss of income due to physical damage caused by a named peril. This typically covers events such as fire or rodent infestation.
The statement went on to say that these particular policies are therefore “unlikely to provide cover for the extraordinary preventative measures (up to and including decisions to close) that have been taken by many businesses to implement social distancing guidelines to mitigate the spread of Covid-19.”
It concluded by saying that in its view where there is a disease extension under a business interruption policy an outbreak of Covid-19 at the premises itself is generally required to trigger cover as well as a denial of access by public authorities. It could be that a business would not be covered unless a member of staff contracted the virus and the authorities forced the closure of the premises as a result.
This interpretation caused widespread concern in the business community who had been called on by Government to close. It was argued that this call amounted in substance to a forced closure by the authorities. There was a call from business for Government and others to intervene with insurers or to legislate as necessary.
The Central Bank's response
In response, to this emerging dispute, the Central Bank of Ireland (“CBI”) has now set out its expectations of regulated insurers during the COVID-19 crisis. In a letter to chairs and CEOs of insurance companies, it addresses a range of insurance-related issues, including how insurers should deal with claims.
The CBI states that firms must ensure that they handle claims effectively and properly and, where appropriate to do so, they must offer assistance to their customers in the process of making a claim, including, where relevant, alerting their customer to policy terms and conditions that may be of benefit to the customer. Any claim settlement offer made to a claimant must be fair, must take into account all relevant factors and must represent the firm’s best estimate of the claimant’s reasonable entitlement under the policy.
Although the CBI expects that most policy wordings are clear in terms of what cover is provided and what cover exclusions are in place, where there is a doubt about the meaning of a term, the interpretation most favourable to the customer should prevail. Firms must ensure that claims are appropriately assessed and where there is insurance cover in place that claims are accepted and paid promptly.
The CBI has taken the view that where a claim can be made because a business has closed, as a result of a Government direction due to contagious or infectious disease, that the recent Government advice to close a business in the context of COVID-19 should be treated as a direction. The CBI notes that this is a view that has also been expressed by the Minister for Finance, Public Expenditure and Reform.
The CBI has also stated that it expects that the CEO of each insurance firm will take responsibility for the oversight of how their firm is managing determinations of whether claims are covered or not in the context of COVID-19. Where the firm is passporting into Ireland, senior management will be expected to take that responsibility. The CBI goes to say that it may require certification from CEOs on the management of determinations as to whether claims are covered or not.
The approach of the CBI will provide comfort to insurance customers who complied with Government closure advice. It is also clear that the CBI will require the insurance industry to engage positively with customer claims and will scrutinise the evolving situation over the coming weeks and months.
How can we help?
The Disputes Group at McCann FitzGerald can assist organisations in addressing their concerns in and around insurance cover and can also advise on the wide range of regulatory and litigation issues business may face in responding to COVID-19. Alternatively, your usual contact in McCann FitzGerald will be pleased to provide further information.
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.