In the latest case examining how business interruption (BI) insurance policies respond to losses relating to the Covid pandemic, the Court of Appeal has unanimously handed down its judgment in London International Exhibition Centre Plc v Allianz Insurance Plc & Ors [2024] EWCA Civ 1026. The judgment will be well-received by “at the premises” policyholders, who, in light of the insurers’ appeal, faced uncertainty as to their chances of successfully recovering under their BI policies.
Background
The appeals stem from Mr Justice Jacobs’s decision which determined preliminary issues in six expedited test cases concerning BI losses suffered by policyholders as a result of Covid. Despite the differing wording of the policies in question, they all provided cover for disease occurring (or in some cases manifesting itself or being suffered) “at the premises” of the policyholder. This contrasted with the policies considered in the Supreme Court’s 2021 judgment in FCA v Arch which provided cover for disease occurring within a specified radius of the policyholder's premises. Whilst that case determined what a policyholder with a radius clause had to prove in order to recover BI losses suffered as a result of the closure of its premises by government action in response to Covid-19, the latest appeal raised the same causation question in respect to cases with “at the premises” clauses.
The Court’s findings
In agreement with Mr Justice Jacobs’s decision in the Commercial Court and contrary to the arguments raised by the insurers, the Court of Appeal concluded that “at the premises” clauses respond on the same basis as “radius” clauses:
“Although there are differences between radius and 'at the premises' clauses, those differences do not materially affect the nature of the causal link which must be proved, save that in the case of 'at the premises' clauses the occurrence of disease must be at the premises themselves and not within a specified distance from them” [73].
Consequently, the test for determining proximate causation set out in FCA v Arch applied, i.e. “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” [212]. The Supreme Court explained that the basis of this conclusion is “…that each of the individual cases of illness resulting from COVID-19 which had occurred by the date of any Government action was a separate and equally effective cause of that action (and of the response of the public to it)” [212].
Practical considerations in light of this “at the premises” judgment
Although in this case the Court of Appeal’s judgment affirms the pro-policyholder decision of Mr Justice Jacobs, it highlights the importance of why policyholders should remain alive to judicial decisions in their favour. When faced with declinatures of cover, policyholders often view such decisions as definitive, when in reality, the legal landscape has been subsequently shifting. It is worth revisiting an originally declined claim to explore whether its policy should in fact now respond.
Any policyholder who believes it may now have an actionable claim under its BI policy should act in order to avoid any limitation defences being raised by insurers. In absence of contrary agreement under the policies, policyholders must bring a claim within 6 years of the date on which the cause of action accrues. As most losses attributable to Covid would have occurred four years ago in 2020, the two-year countdown is likely to have already begun ticking.
[1] Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1
