The Court of Appeal has today (Friday 6 September 2024) given the latest judgment in the ongoing series of court decisions concerning the Covid-19 pandemic and the true operation of notifiable disease extensions found within Business Interruption policies (London International Exhibition Centre v Various Insurers – 06 September 2024).
This decision is very important as it gives plainly stated guidance in the case of such extensions where the insured peril is “disease at the (Insured) Premises”. Subject to any further appeals, the decision resolves the correct approaches to understanding the insured peril and the consequent test of causation in the case of these so-called “ATP policies”.
Essentially at issue before the Court of Appeal was whether the same approach to causation as had been found to apply by the Supreme Court to other forms of notifiable disease cover in the earlier test case of Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] should be “read across” to the ATP policies.
The 2021 case was concerned with a variety of “radius” and “hybrid” clauses, each of which contemplated notifiable disease within a radius of the premises or causing closure or restriction affecting the premises. In the 2021 case, there was a principal finding by the Supreme Court that cover would be triggered and the applicable test of causation would be satisfied where it was shown that relevant “lockdown measures” were made or continued in response to cases of all Covid-19, but which included at least one case of Covid-19 within the relevant radius as defined by the particular notifiable disease extension.
Before the Court of Appeal, the defendant insurers contended that a different approach was dictated by the particular nature of the insured peril in the case of the ATP policies; the cover under which, it was said, essentially focused much more closely, locally and specifically on the insured premises themselves.
The Court of Appeal heard a range of arguments as to the true nature of the insured peril in the case of the ATP policies and how it was said that such dictated an applicable test of causation potentially ranging from a conventional “but for causation” approach, through a suggested test of “distinct and effective causation” and finally to the adoption of the same approach as had been found by the Supreme Court.
The Court of Appeal was particularly careful to avoid reaching its conclusion by any “reverse engineering” from the starting point of the Supreme Court decision. The analysis proceeded by first determining the true nature of the insured peril under the ATP policies and then extrapolating from that insured peril the correct approach to causation.
As to the insured peril, it was found that the very nature of notifiable diseases meant that the cover had to contemplate a scenario of widespread infection:
“Accordingly, if the parties had applied their minds to the circumstances in which the insured premises were likely to be closed by a relevant authority as a result of an occurrence of disease at the premises, they would have contemplated that closures or restrictions imposed by the authority in such cases would be unlikely to be a response only to the occurrence of the disease at the insured premises. Rather they would be imposed in response to the outbreak as a whole over the relevant area, whether local or national. Indeed, the worse and more widespread the outbreak of the disease, the more likely it would be that such restrictions would be imposed. If the disease clauses were to have meaningful content, therefore, the parties must have intended that there would be cover in such circumstances.”
It followed that the properly applicable test of causation had to respect the same considerations as had impressed the Supreme Court in the 2021 decision:
“These considerations demonstrate, in our judgment, that the parties cannot have intended a conventional ‘but for’ approach to causation to apply. In the circumstances in which the insured peril was likely to arise, and cover under the disease clause would be most needed, it would in general be difficult or impossible for the policyholder to prove that the restrictions would not have been imposed ‘but for’ the occurrence of the disease at the insured premises. Accordingly the parties must have intended that the causation requirement would be satisfied if the occurrence at the premises was one of a number of causes of the closure (or, in the case of a ‘pure’ disease clause, of the BI losses suffered as a result of the disease). Moreover, it would not have mattered to the parties whether the number of other causes was large or small. Indeed, the larger the number, the more likely it was that restrictions would be imposed and the cover would be needed.”
The net result in the case of the ATP policies was, therefore, essentially the same as in the case of the radius clauses, albeit by a subtly different rationale:
“Accordingly, although we have preferred to base our conclusion on the language and context of the ‘at the premises’ clauses in issue and the presumed common intentions of the parties, rather than on how the Supreme Court interpreted the radius clauses, we agree with the conclusion and much of the reasoning of the judge on the common causation issues. 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.”
The Court of Appeal went on to deal with a number of other contentious points finding:
Subject to any appeals, the Court of Appeal decision does substantially resolve the operation of the ATP policies in principle, but there remains very substantial scope for further challenges for policyholders in addressing the evidential position and proof – even on the balance of probabilities – of relevant infection at any particular insured premises during the qualifying period.
If you have any questions as to where the Court of Appeal decision leaves matters, please contact any member of our Coverage team involved in the conduct of the case:
Richard Houseago, Partner
Email: rhouseago@keoghs.co.uk
Raphinder Jhinger, Associate
Email: rjhinger@keoghs.co.uk
Bhrina Lad, Associate
Email: blad@keoghs.co.uk
The service you deliver is integral to the success of your business. With the right technology, we can help you to heighten your customer experience, improve underwriting performance, and streamline processes.