Following the outcome of the Supreme Court appeal on the FCA’s Business Interruption test case, our expert claims team provide an update on the latest declarations relating to certain insurers named in the verdict.
If you have any questions about the test case, or would like to discuss the impact of Business Interruption on your business, the NDML team will be happy to help here.
- There is no occurrence or manifestation of COVID-19 within a given radius merely by reason of the fact that a person travelled through that geographical area and had no contact with anyone living in the area.
- The UK Government is a:
- Governmental Authority or Agency
- Public Authority
- Competent Public Authority
- Civil Authority
- Competent Civil Authority
- Competent Local Authority and/or Statutory Authority
- There was an ‘occurrence’ of the disease from the 5th March 2020 (England) and the 6th March 2020 (Wales) – these are the dates that COVID-19 became a notifiable disease.
- ‘Interruption’ includes interference or disruption, not solely a complete cessation of the insured’s business activities.
- However ‘inability to use’ must be established – impairment or hindrance in use is not sufficient. Nonetheless cover can respond if there is an ‘inability to use’ part of an insured’s premises for part of its business activities. There is only cover for those losses stemming from the part of the premises that could not be used.
- A ‘restriction imposed’ does not require the force of law as long as its terms and context amount to an instruction whose compliance would reasonably be understood to be required. This can take the form of an instruction which is understood to be legally binding at a point in the future (ie. the PM says “venues should close” but the law only comes into effect after it has passed through Parliament some days later). This also applies to an instruction that would have been made law if compliance had not been observed.
The above emphasises the position asserted in the Supreme Court’s initial judgement that ‘inability to use’ a business’ premises is a crucial prerequisite of the coverage under the Hiscox policy. This ‘inability to use’ must derive (in effect) from a restriction imposed by the Government – obviously this will apply to hospitality venues, but for other businesses that were impacted by COVID-19 (although not strictly forced to close) it looks unlikely that a claim would be considered under the policy.
- Regarding QBE, human action and/or intervention (including Social Distancing etc) could in principle cause interference with the insured business.
The QBE policy could respond to claims arising from losses caused by various actions taken in relation to the COVID-19 pandemic without necessarily requiring a formal lockdown. As such, losses stemming from Social Distancing and the imposition of restrictions linked to the ‘Tier’ arrangements could enable a claim to be considered. However this opens up questions of new proximate causes – thus far QBE have suggested that COVID-19 is the single proximate cause of a claim and all the restrictions that follow are contained within the same. However, the advice from the Declarations is ambiguous on whether ‘new’ restrictions or an intensification of the same would need to be considered as new proximate causes, and therefore new claims. This is a point that has been the subject of much discussion since the original judgement in January, and further investigations and legal opinions will follow now that the Declarations have been published.