The High Court issued a major judgment on 15 September, the effect of which is to provide a direction to insurers to consider claims payments to businesses who held business interruption insurance and were forced to close due to the COVID-19 pandemic.
Subject to policy limits, insurers should, if coverage is confirmed, compensate businesses in order to return them to the position they would have been in had the pandemic never happened. The judgement is complex and deals with many issues. It considered 21 specific commercial policy wordings and will guide the construction of other policies not before it.
Essentially, it confirms that where commercial policies contains wide ‘disease’ (especially) and/or ‘denial of access’ clauses, then these can provide business interruption cover for COVID-19 pandemic losses.
The judgment does not direct that every business may recover its losses from its insurers. It will also be easier to claim a payment under a widely worded disease clause than under denial of access clauses: denial of access clauses will only engage to pay claims depending on the actual clause wording and how the business was affected by the Government response to the pandemic. Defending on clause wording, it may be material whether the business was subject to a mandatory closure order, or whether it closed completely.
Before the Judgment insurers invariably took the position that business interruption insurance could not be considered to cover pandemic losses, and that the Government and public response could not be a single cause of the covered loss. The Court rejected those positions.
Each policy needs to be considered against the details in the judgement. Not all potential issues are addressed, and the case undoubtedly will be appealed, but there is now a basis mapped out for policyholders claims to be considered and for insurers to make claims payments for COVID losses.
With the prospect of more local lockdowns in the months ahead, this judgment may also support further claims under commercial policies.
Devonshires advises on these issues and is instructed on such specific insurance claims.
For more information, please contact Stephen Netherway, Partner in our Litigation & Dispute Resolution team.