Irish Central Bank Warns Insurers Over COVID-19 Payouts

By Lucia Osborne-Crowley
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Law360, London (February 18, 2021, 4:35 PM GMT) -- Ireland's central bank has warned insurers that it will scrutinize how they deal with business interruption payouts linked to COVID-19 after policyholders won a court battle over cover for the pandemic.

The Central Bank of Ireland warned on Wednesday that it will continue to examine the way in which domestic insurers treat policyholders who lost money as a result of the national lockdowns and try to claim compensation under policies for business interruption.

The country's High Court backed four pubs on Feb. 5 in a test case over insurance for disrupted business that could mean at least 1,000 other companies could be in line for an insurance payout.

"We have made our expectations abundantly clear and we now expect firms, where they have not already done so, to take a proactive and swift approach in their communications with customers and resolution of valid claims," Derville Rowland, the central bank's director general for financial conduct, said.

"While there are further decisions before the courts in relation to the quantum of payments, we do not see any reason for any firm to delay matters any further for customers in advance of those hearings," Rowland added.

The central bank told insurers it expects them to follow strict guidelines. They should honor valid claims and pay out promptly, ensuring that they favor consumers if there is doubt over the interpretation of a policy, and that they make interim payments to policyholders awaiting final determinations.

Where legal action results in an outcome that benefits a group of consumers, firms must also take action to ensure all those individuals benefit from the final outcome, the bank said.

Rowland added that the central bank's system-wide examination has already helped consumers who have been hit by the pandemic.

"Following the extensive identification and review of hundreds of different policy types, a number of insurance firms had already accepted and commenced settling claims prior to the recent court decision," she said.

The central bank emphasized that its audit will check that all insurers take a "customer-first" approach to all policies. It said it is willing to use its powers to intervene where appropriate.

Ireland's financial watchdog also sent out a warning this month that it will "take action" if insurers drag their heels on making payments to small businesses forced to close for pandemic lockdowns, citing the court ruling.

FBD, the insurer in the court case, denied the claims made by the pubs on the basis that the business closure during lockdown was not the consequence of a local outbreak but the countrywide presence of the disease.

But Judge Denis McDonald disagreed with the insurer, saying it should pay out on claims where there is evidence of the virus within the geographic radius set out in the policy.

--Additional reporting by Martin Croucher. Editing by Joe Millis.

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