The Central Bank has told insurance companies not to force all holders of similar policies to take legal action, in order to benefit from test cases linked to business interruption claims.

Earlier this year, the High Court ruled in favour of four pub owners involved in a test case against insurance group FBD.

The publicans had made claims for losses due to business interruption as a result of COVID-19 restrictions. FBD had originally argued that the policies did not cover events such as the pandemic.

Wider impact

Today (11 June), the regulator said that, in cases where the final outcome of a legal action taken by customers would have a wider beneficial impact for similar customers, insurers should make sure that all customers received that benefit.

“If an insurance policy is interpreted in any legal action in a manner favourable to policyholders, the Central Bank is of the view that an insurer would not be acting fairly, and in the best interests of its customers, if it does not give the benefit of that outcome to other similarly placed policyholders,” the bank’s director of consumer protection Gráinne McEvoy said in a letter.

“Insurers should not insist on policyholders pursuing a multiplicity of legal actions dealing with similar issues,” she added.

Other firms

The Central Bank said it also expected insurers to look at the outcomes of legal actions linked to policies offered by other firms with similar business interruption clauses, and to give the benefit of these outcomes to its policyholders where appropriate.

A framework published by the Central Bank on the issue last year said that the term ‘legal action’ included arbitrations, proceedings before the courts, and cases before the Financial Services and Pensions Ombudsman.