Swift claims settlement is key to rebuilding Covid-hit reputation says legal alliance

Insurers can begin to restore their tarnished image if they move quickly to settle outstanding Covid-19-related claims, according to law firm network Global Insurance Law Connect (GILC).

GILC has issued its second report as part of a series exploring the impact of the pandemic - the insurance law firm alliance predicted that the UK market will face challenges.

In its analysis of the UK market, the report said that insurers need to act quickly to look to rebuild its reputation, which had been damaged by the business interruption (BI) coverage disputes and the subsequent test case action brought by the FCA.

“Although there has been criticism of the insurance industry’s stance in resisting the test case, it may be able to restore some of the reputational harm it has suffered in that respect if it can respond promptly and transparently to the challenge of resolving outstanding claims,” added the report.

“On the consumer insurance side, a handful of insurers had offered rebates or reductions on motor policies because people were driving far less due to the lockdown restrictions. It is unclear if this will become more widespread across the market.

“The claims sector could face real strains if Covid-19-related difficulties are compounded by serious adverse weather incidents and by supply chain issues related to the ending of the Brexit transition period.”

Upcoming challenges

Speaking on the report, GILC chairman Jim Sherwood said: “Since our first report on the impact of Covid-19 in July 2020, we have seen changes in the way we live and work and have begun to understand the challenges for businesses and economies around the world.

“Our GILC members here highlight the common themes which are emerging, from coverage to regulatory change, [as] well as focusing on country specific issues. For example, disputes concerning business interruption have triggered challenges in numerous jurisdictions.

“Our members also look at the claims to come, not least in [directors’ and officers’], where several members focus upon the likely increase in bankruptcy procedures leading to legal actions and claims under credit insurance.

“How are the courts adapting and what regulatory changes do you need to address? A recurring topic is the change in working practices and business environment, while the acceleration in digitisation has seen the industry move several years’ forward in just a few months.”

Claims influx

The report said the UK the market was braced for an influx of claims as the national lockdown prepares to be eased.

“Aside from business interruption, claims are emerging slowly,” it explained. “Few liability claims have been notified but it is expected this will change.

“There has been a good deal of debate about the potential for liability for occurrences of [Covid-19] in employers’ and public liability settings, with care homes housing the elderly being a particular area of real concern.”

GILC added that the pandemic and the vaccination programme which has been rolled out in countries across the world had the potential for new liability issues too.

“There has also been commentary on EL and PL risks associated with employers’ and service providers’ decisions to impose vaccination as a mandatory requirement,” it said.

“There are also data security risks in storing and processing sensitive personal data relating to the testing or vaccination of employees and/or customers.”

Virtual hearings

The lockdown and the move to virtual trials in the UK is likely to change the way the legal system operates in the future, according to GILC - lessons learned from the pandemic may see rising numbers of cases heard without the need to be physically present.

“There is increasing evidence that senior judges are looking to build from their experience of remote justice and work where possible to develop a ‘digital first’ approach for the future,” it said.

“The newly-appointed head of civil justice, Sir Geoffrey Vos, is a strong advocate of this. We expect matters to move forward in 2021.”