UK decision on COVID Business Interruption claims handed down

The Supreme Court handed down its decision on the test case on business interruption claims involving COVID-19.

Essentially, the Court rejected all insurers’ appeals from the lower court hearing and pleasingly clarified many issues.

The key points are:  

• If there is at least one episode of COVID-19 within the insured radius, the “continuous cause” decision of the lower court is upheld an instruction given by a public authority may amount to a “restriction imposed” if it carries the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers (our emphasis) – this overturns the lower court decision that only restrictions complying with legislation give rise to a claim under the public authorities cover Partial inability to use premises is still an inability;
• the High Court decision that the inability must be total is overturned;
• on causation, the Supreme Court held that if losses were also caused by other uninsured and not excluded effects of the COVID-19 pandemic, that does not exclude them;
• the Orient Express case was held to have been wrongly decided: area loss of business due to COVID-19 restrictions cannot be used as a trend argument to reduce the claim;
• trend clauses serving to reduce the claim are only valid to the extent that they are not in any way COVID related; 
• this decision is a major victory for the Financial Conduct Authority (‘FCA’) and its joint claimants.
• one aspect the Supreme Court did not deal with: aggregation. This assumes some importance, given successive lockdowns and will no doubt be brought before the UK courts at some stage.

The abandonment of the Orient Express argument has been especially welcome by many as it has long seen to be a wrong decision that has resulted in so many claims for insureds having their claim reduced when in the past they would not have been.

The parties and the Supreme Court still have to issue declarations on which practical handling will be based.  

We now wait the decision of the Australian test cases to see if they follow the same thought process as the UK or go in a different decision.

One of the things that I have been very keen to ensure is that insureds who have been through a great deal of financial and mental stress are not given false hope as this would be cruel in the extreme.

As I have reported, the Australian court has confirmed that those policies that have an exclusion which refers to the Biosecurity Act are valid and can be relied upon by the insurer.

There are a number of issues with the balance of the claims with one key issue being the geographical range in which an outbreak needs to have occurred. For example, if the policy provided cover for an infectious disease ‘at the premises’ and there was no outbreak at the Insured’s premises then of the face of it it is unlikely that there is no claim.

Having said that, policies are different and the entire wording needs to be read to see what extensions of coverage are available and what exclusions apply.