Over the past few months, there has been much uncertainty regarding Contingent Business Interruption (CBI) insurance cover. The uncertainty stems from the many legal complexities surrounding CBI policy wordings. In a Press Release, the FSCA confirmed that it has been engaging with the non-life insurance industry on the most efficient way to approach the courts in order to obtain legal certainty on CBI cover and the view of the majority of non-life insurers is that the cases currently before the South African courts and the one by the Financial Conduct Authority (FCA) in the United Kingdom will provide the required legal certainty on CBI policy wordings.
The FCA judgment was handed down by the United Kingdom High Court on 15 September 2020. The proceedings were brought as a test case by the regulator with the purpose of clarifying key issues of contractual uncertainty for as many policyholders and insurers as possible. Eight insurers participated in the test case and twenty-one sample policy wordings were considered. The Court found in favour of the arguments advanced for policyholders by the FCA on most of the key issues. The test case will assist to provide clarity for policyholders and insurers; and removes the need for policyholders to resolve certain key issues of contractual uncertainty individually with their insurers. The FCA’s legal team at Herbert Smith Freehills have published a summary of the judgment, click here to read the summary.
The FSCA confirmed that it is studying the FCA judgment and will also wait for the outcome of cases currently before the South African courts to see if they do indeed provide the required legal certainty on all elements of the CBI policy wordings, failing which the FSCA will engage with the non-life insurance industry and consult its legal representatives again in an effort to have such elements or uncertainty clarified efficiently.
Click on the links below to read the documents: