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Insurers should pay Covid legal bills


The Central Bank in Dublin

The Central Bank in Dublin

The Central Bank in Dublin

Insurance companies should pay the legal costs of customers who challenge their refusal to pay out on business interruption claims, the Central Bank of Ireland says.

In updated guidance, the regulator said that where cover and related issues are disputed, the Central Bank expects firms to pay the reasonable costs of customer plaintiffs in agreed test case litigation.

The most high profile of such cases at the moment involves claims taken by four publicans against FBD, that are representative of hundreds of similar claims.

FBD last week increased its estimate for the likely costs in relation to the actions, which will be heard in October, from €22m to €30m

It is understood the regulators expects insurers to take on their opponents legal costs, even if the insurer wins. Typically in a court action the court will order the losing side to pay their own and their opponents legal costs.

Regulators are understood to regard that as an unfair burden on small firms - not least because if they lose their test cases, the insurance companies will benefit from being able to apply the same decision across hundreds more cases at little or no extra cost.

Where customers have an entitlement to claim under a business interruption insurance policy, the Central Bank expects that claims will be processed and paid promptly and fully.

The Central Bank said that some of these policies provide cover for an interruption related to the Covid-19 outbreak, while others clearly do not.

In some cases, the position is unclear but a strong or reasonable argument can be made that they do provide cover, the regulator said.

"The Framework reiterates our core message to firms: that they honour valid claims in full and pay them promptly," said the central bank's Director General of Financial Conduct, Derville Rowland.

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"Furthermore, where cover is disputed and businesses have pursued litigation, insurance firms should be cognisant of the significant costs burden faced by their customers. We therefore expect that in circumstances where the firm obtains the benefit of a court's interpretation of issues at hand, a firm should agree to pay the reasonable costs of customer plaintiffs in agreed test case litigation and should not seek its costs against these plaintiffs," she said.

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