UK

Has the official regulator/authority intervened to help resolve contractual uncertainty around the validity of BI claims?

Yes.

On 1 May 2020, the Financial Conduct Authority (FCA) announced its intention to bring a test case in the English High Court to resolve contractual uncertainty regarding BI insurance cover. For further information on the background to this case, please see our previous article here.

The judgment was handed down on 15 September 2020, and found in favour of BI insurance policyholders on the majority of the key issues. You can read more about the decision here.

The case has provided some welcomed clarity as to the meaning and effect of a select group of BI policy wordings.

On 2 November the UK Supreme Court granted permission to appeal to all applicants. The appeal in the Supreme Court was heard in November 2020 and judgment is was handed down in January 2021. The Supreme Court further widened the scope of policies which may now be engaged by the COVID-19 pandemic and confirmed the correct interpretation of the trends clauses where claims are brought in respect of COVID-19 related losses. You can read a summary of the UKSC decision here.

The FCA has also provided some helpful resources in response to this Supreme Court decision, including a policy checker and guidance on how to establish the presence of COVID-19 in BI claims.

There have been additional High Court judgments in this area. One decision suggests that policyholders may find it difficult to make successful claims for COVID-19 losses where their insurance policies provide BI cover for physical damage only. For more information, please see our article here.

Another recent decision considered whether cover exists for COVID-19 related losses in BI policies said to be engaged by an express list of diseases, not including COVID-19. The Court interpreted the wording of the BI policy strictly, and found that there was no coverage in such circumstances. For more information please see our article here.

Do insurance policies in your jurisdiction generally restrict BI to losses directly resulting from physical damage?

The type of BI loss covered under an insurance policy will depend on the precise terms of the policy in question.

Some policies will not restrict BI to losses directly resulting from physical damage. In broad terms, there are three key types of BI cover:

Physical damage to an insured's property that occurs by reason of a specific event (e.g. a fire), which causes interruption to the insured's business.
Physical damage to a third party's property that occurs by reason of a specific event (e.g. a fire), which causes interruption to the insured's business.This is typically taken out where an insured's business is reliant on a supply chain (e.g. an important supplier is affected by a fire).
The interruption to an insured's business results from a specific event, for example where restrictions imposed by public authorities prevent an insured from accessing its business location.

Type number 3 is not dependent on any physical damage to property. This type of cover can be included in a standalone policy or under a policy extension, usually at an additional premium.

Are there any court proceedings currently dealing with the validity of BI claims?

Proceedings have begun in several cases following the findings of the Supreme Court (UKSC), handed down on 15 January 2021, in the FCA v Arch test case. As part of the overall strategy to manage COVID-19 BI claims actively, following the outcome of the test case, the Commercial Court is seeking to manage subsequent claims via a sub-list directed by Mr Justice Butcher where cases can be co-ordinated and monitored together.

The key issues covered in some or all of the following cases appear to be aggregation of losses, the wording and interpretation of the insuring clauses, the applicable test for causation, and the operation of the indemnity period:

Stonegate Pub Company Ltd. -v- MS Amlin Corporate Member Ltd & Ors (CL-2021-000161)
Greggs PLC -v- Zurich Insurance PLC (CL-2021-000622)
Various Eateries Trading Ltd -v- Allianz Insurance PLC (CL-2021-000396)
Lumi Power Yoga Ltd -v- Covea Insurance PLC (CL-2021-000727)
Altrincham Association Football Club Ltd -v- AXA Insurance UK PLC (CL-2021-000733)
Simpsons (Preston) Ltd and Anr -v- MS Amlin Underwriting Ltd. (CC-2021-MAN-000079)

In particular, given that the cases of Stonegate, Greggs and Various Eateries (as mentioned above) all relate to the same policy wording (being the Marsh Resilience wording), they have been subject to consolidated case management directions by the Court and are being heard by the same judge (Butcher J). Judgments for those three cases are expected to be handed down in Autumn 2022. For more information and further updates on how the Commercial Court is managing COVID-19 BI claims, please see here.

Have any judgments been given that deal with BI claims in relation to the current COVID-19 pandemic or other contagious/infectious diseases?

Yes.

The recent UKSC judgment has provided detailed guidance on the interpretation of a number of sample policy wordings, in light of the COVID-19 pandemic.

Proceedings were initially paused on a number of potential group and individual disputes whilst parties awaited the outcome of the FCA test case.

Immediately following the Supreme Court findings in Arch, an expedited trial was held in Corbin & King -v- AXA Insurance PLC. The claimants (owner-operators of a number of restaurants, cafes and other establishments around London, and policyholders of a combined business insurance policy issued by the defendant insurers) sought to claim for BI losses suffered as a result of the extensive government restrictions. The main issues included how a ‘Non Damage Denial of Access’ clause was to be interpreted and given effect to in light of the UKSC decision in Arch. Judgment was handed down on 25 February 2022 (available to read here). Permission to appeal to the Court of Appeal was granted but no appeal will be pursued.

A recent arbitration award has dismissed a claim in relation to COVID-19 business losses and the applicability of notifiable disease policy wording. This award makes it clear that going forward, BI losses will be considered and determined in accordance with express wording of the provisions and the individual background facts of each case. For more information see our article here.