Financial Conduct Authority
COVID-19 - FCA publishes statement on BI insurance in light of its High Court test case - 15 May 2020
The FCA has published a statement on how it is engaging with policyholders and insurance intermediaries on business interruption (BI) insurance ahead of its High Court test case, which seeks an authoritative declaratory judgment about the meaning and effect of some BI insurance policy wordings to resolve key contractual uncertainties. If the FCA obtains a declaratory judgement, the Financial Ombudsman Service (FOS) will be able to take the judgement into account when considering relevant COVID-19-related BI insurance complaints.
The statement contains information about how the FCA intends to support and engage with policyholders, including:
- considering arguments and factual circumstances communicated by policyholders and insurance intermediaries (including discussions with legal representatives that have been appointed);
- using the arguments, policies and fact patterns put forward by policyholders to inform the sample of policy wordings and fact patterns (a summary of the key facts of a case) to be used in the court proceedings;
- making public the pleadings in the test case; and
- publishing other information that is relevant to the test case, subject to statutory limitations.
The FCA invites parties who are aware of unresolved disputes with insurers over BI policies to inform the FCA, if they wish the FCA to take their concerns into account as part of the test case. The FCA is interested in arguments concerning why cover should be available, details of policies and brief facts.
The deadline for submission is 20 May 2020. The FCA will treat all gathered information as confidential. The outcome of the test case will be binding on the insurers that are parties to the test case.
FCA statement on High Court test case for BI insurance in light of COVID-19
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Recent Cases
Adams v Options Sipp UK LLP (formerly Carey Pensions UK LLP) and the Financial Conduct Authority, [2020] EWHC 1229 (Ch), 18 May 2020
Liability of an execution-only SIPP provider to an investor - FCA Conduct of Business sourcebook (COBS) Rule 2.1.1 - FSMA 2000 (Regulated Activities) Order 2001 (SI 2001/554) - FSMA 2000
The High Court has delivered a ruling in a landmark test case on the potential liability of an execution-only self-invested personal pension (SIPP) provider to an investor, whose underlying investment in the SIPP sustained significant losses.
Mr. Adams (the Claimant) claimed that:
- Options Sipp UK LLP (formerly Carey Pensions UK LLP) (OSUK LLP) had breached its duty under FCA Conduct of Business sourcebook (COBS) Rule 2.1.1 to act “honestly, fairly and professionally in accordance with the best interests its client” by failing to advise the Claimant in relation to the underlying investment in the SIPP; and
- section 27 FSMA 2000 permitted the contract with OSUK LLP to be declared unenforceable on the basis that the unregulated introducing broker was in breach of section 19 FSMA 2000 in arranging and/or advising on investments within the meaning of Articles 25 and 53 of FSMA 2000 (Regulated Activities) Order 2001 (SI 2001/554) (RAO).
The High Court rejected each claim, concluding that: (i) in order to identify the extent of any duty imposed on a SIPP provider by COBS Rule 2.1.1, one has to consider the underlying contract between the parties which defines their roles and functions; and (ii) the contract made clear that OSUK LLP did not owe a duty to advise on the underlying investment. With regard to the section 27 FSMA 2000 claim, the Court concluded that the unregulated introducing broker was not arranging and/or advising on investments within the meaning of Articles 25 and 53 of the RAO.
Adams v Options Sipp UK LLP (formerly Carey Pensions UK LLP) and the Financial Conduct Authority [2020] EWHC 1229 (Ch)
