High Court opens way for increased business interruption claims
A recent High Court decision has significant implications for business interruption policy holders and leaves insurers facing potentially increased Covid-related costs.
Policyholders who have suffered serious losses as a result of the Covid-19 pandemic have seen their claims denied by insurance companies will be encouraged by the ruling.
The court examined the cover provided by a Non-Damage Denial of Access (“NDDA”) clause, in the trial of a Covid-19 business interruption (BI) insurance case - Corbin & King Ltd v Axa Insurance UK Plc.
The High Court ruled Axa’s UK arm should pay out under a business interruption policy for losses the hospitality group incurred during repeated pandemic lockdowns in 2020, a decision expected to cost Axa more than £4m.
The High Court rejected the argument that Corbin’s claims were limited to £250,000 in respect of all premises and supported the company’s assertion that it was £250,000 per premises per closure.
The case was the first to challenge BI cover since the Supreme Court decision in the Financial Conduct Authority v Arch Insurance (UK) Limited and Others (the “FCA Test Case”). The FCA Test Case had been brought on behalf of small and medium-sized businesses (SMEs) policyholders who had suffered financial losses arising from BI caused by the Covid-19 pandemic.
Corbin & King owned and operated a number of restaurants and as a result of measures imposed by the UK Government during 2020 in response to the Covid-19 pandemic, access to the Insureds’ premises was restricted
The Supreme Court’s approach to causation in respect of “disease” clauses is what “moved the goalposts” according to Mrs Justice Cockerill. The Supreme Court held that, “in order to show that loss from interruption of the insured business was proximately caused by one or more occurrences of illness resulting from COVID-19, it is sufficient to prove that the interruption was a result of Government action taken in response to cases of disease which included at least one case of COVID-19 within the geographical area covered by the clause”. Consequently, each case of Covid-19 formed “equal causes of the imposition of national measures”.
As the 2021 Supreme Court case could not cover all types of policy wordings it was expected that new cases would be initiated.
In this most recent case, Axa had taken the stance that it was not liable to indemnify the Corbin & King group because the insurance policy only provided “a narrow, localised form of cover” in respect of a “danger or disturbance” specific to the locality of the insured premises — rather than providing cover against a national situation.
In response, Corbin & King argued its insurance policy did not have to cover a limited area. Following this victory by Corbin & King it is expected that other policyholders, faced with a similar response from their insurers, will review their policies and seek to be paid out per Covid claim and per premises.
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