FCA rejects Herbert Smith conflict claim


HSF: No conflict

The Financial Conduct Authority (FCA) and Herbert Smith Freehills have strongly rejected the suggestion that the City law firm giant has any conflict in acting for the regulator on the business interruption insurance test cases.

Mactavish, which describes itself as a “specialist outsourced insurance buyer and claims resolution expert”, has urged Herbert Smith to disclose if it represented any of the insurers or brokers whose wordings will be subject to scrutiny as part of the litigation, which is determining whether the policies cover coronavirus.

If it did, Mactavish said, it would be “difficult to see how conflicts of interest would not arise”.

It argued there was a public interest in disclosure because the FCA, “which will presumably be paying their fees, is funded by the taxpayer and was set up to be an independent body to protect the interests of consumers”.

Bruce Hepburn, the chief executive of Mactavish, explained: “We believe the law firm has close relationships with many insurers and/or brokers. It may have advised on the very wordings being tested by the court.

“In the spirit of transparency, those insurers and brokers should agree that their identities should be disclosed to demonstrate there is no risk of any conflict of interest arising.”

A Herbert Smith Freehills spokeswoman said: “As you would expect, we have a robust global conflicts procedure in place. There is no conflict of interest here.”

An FCA spokesman added: “We are very clear that there is no conflict of interest and the claims made are unfounded. We have engaged three highly respected QCs from a number of different chambers alongside Herbert Smith Freehills [Colin Edelman QC, Leigh-Ann Mulcahy QC and Richard Coleman QC].

“The FCA is seeking to ensure that we can get clarity in this case as soon as possible.

Mactavish has also been campaigning over what it says are conflicts facing insurance brokers, who it says receive as much as 80% of their remuneration from insurers and just 20% from clients.

“These conflicts risk leaving brokers acting as distributors for favoured insurers – often using inappropriate, over-standardised policy terms which have again been exposed by failed coronavirus related business interruption insurance claims.”

Mr Hepburn said: “For there to be complete confidence in its current legal case of BI insurance claims linked to Covid-19, and for any future reviews of the sector, we believe the FCA needs to be completely transparent about its processes, and which partners it chooses to work with and why.

“The insurance industry is riddled with conflicts between insurers, brokers and law firms and the FCA needs to guarantee and demonstrate to beleaguered British businesses that its process is totally transparent and the potential for legal and commercial conflicts is minimized through active management.”

The test cases are set to go before the High Court next month.




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