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Ecclesiastical Insurance ruled not liable to compensate for loss caused by Covid-19

18 September 2020

Test case brought to High Court this week

Jason Bryant

The Dean of Wells, the Very Revd Dr John Clark, and clergy remove their masks as they leave the cathedral after a service last Sunday

The Dean of Wells, the Very Revd Dr John Clark, and clergy remove their masks as they leave the cathedral after a service last Sunday

ECCLESIASTICAL Insurance Group (EIG), the largest church insurer through its Parish Plus policies, has been deemed not liable to compensate for loss caused by Covid-19.

Judgment was given this week after a test case was brought to the High Court by the Financial Conduct Authority (FCA). It examined the wording of policies on business-interruption cover from eight major insurers (News, 24 July, 31 July). EIG had argued that its business-interruption policies were not designed to cover a government-imposed lockdown. The value of policies affected by the test case was estimated to be about £1.2 billion.

The Court “substantially” found in favour of the arguments advanced for the policyholders on the majority of key issues, but cautioned that not all policies would pay out. The ruling did not say that insurers were liable across all the 21 different types of policy wording in the representative sample considered by the court, and parties can appeal against the judgment.

Policyholders with affected claims could expect to hear from their insurers within the next seven days, the FCA said. Its interim chief executive, Christopher Woolard, said on Tuesday: “Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat.

“Our aim throughout this court action has been to get clarity for as wide a range of parties as possible, and today’s judgment removes a large number of those roadblocks to successful claims, as well as clarifying those that are not successful.”

Mr Woolard continued: “If any parties do appeal the judgment, we would expect that to be done in as rapid a manner as possible, in line with the agreement that we made with insurers at the start of this process. As we have recognised from the start of this case, thousands of small firms and potentially hundreds of thousands of jobs are relying on this.”

EIG had described its own exclusion clause on “closure or restriction in the use of business premises due to the order of a competent local authority because of an occurrence of an infectious disease” as clear and unambiguous. It argued that its business-interruption policies “were not designed to provide cover for pandemics, and have specific exclusions against infectious diseases like Covid-19 within them”.

A spokesperson for EIG said on Wednesday: “We appreciate that this has been a difficult time for our church and cathedral customers, in what has been an unprecedented and uncertain period. We agreed to take part in the Test Case as we wanted to engage positively in the process, to bring certainty and clarity as quickly as possible.

“The High Court judgment stated that our Business Interruption policies were not designed or intended to cover the Covid-19 pandemic and therefore claims are not payable. We recognise that whilst the ruling supports the position we have taken, the judgment will clearly be disappointing to some policyholders.

“We are acutely aware of the impact of the last several months on our church and cathedral customers, so [we] have increased our support to them, including providing cover enhancements and Covid-19 risk advice to help places of worship open safely.

“In addition, we have launched a fundraising portal to raise funds during this challenging period, and continue to donate £130 to a nominated parish church or cathedral for every new home-insurance policy sold. We remain committed to supporting our church and cathedral customers in the coming weeks and months.”

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