Business interruption insurance in the context of COVID-19 has been back in the focus of the courts in Corbin & King Limited and Others v Axa Insurance UK Plc. The High Court has provided some good news for policyholders on coverage under prevention of access wordings and the aggregation of losses at multiple premises.

The questions before the court were:

(i) Whether the non-damage Denial of Access wording provided effective cover for losses flowing from restrictions on access to the claimant’s eight restaurants; and

(ii) If so, whether a limit in respect of these losses applied across all the premises or whether the limit applied in respect of each restaurant.

Legal Background

The FCA test case which ended up in the Supreme Court examined a number of aspects of business interruption insurance including the coverage under non-damage Denial of Access (“NDDOA”) clauses. The Divisional Court held that the majority of these clauses provided a “narrow, localised form of cover” which did not respond to the circumstances of the Covid-19 pandemic. It should be noted that this point was not appealed by the FCA to the Supreme Court which has allowed for arguments to be made on this issue.

The issue of whether the Covid-19 pandemic was capable of triggering coverage under a clause requiring “an emergency likely to endanger life or property in the vicinity of the Premises” was raised in the China Taiping Arbitration. Lord Mance sided with the policyholders and effectively opened the door for the issue to be fully examined before the courts.

(i) Prevention of access

The policyholders in Corbin & King sought coverage for their BI losses arising from restrictions, including the closure of eight insured restaurants, under the following NDDOA clause which allowed coverage for:

“the actions taken by police or any other statutory body in response to a danger or disturbance at your premises or within a 1 mile radius of your premises”

The insurers denied coverage relying on the Divisional Court’s decision in the FCA test case.

In this case, Cockerill J held that:

Covid-19 was capable of being a danger within one mile of the insured premises which, coupled with other uninsured but not excluded dangers outside led to the regulations which caused the closure of the businesses and caused the business interruption loss.

Corbin & King were therefore covered for their losses under the NDDOA clause. This then raised the question of how those losses should be calculated.

(ii) Aggregation of losses at multiple premises

The NDDOA cause included a limit of £250,000. The question followed as to whether this applied as an aggregate limit or to each of the eight insured premises. It was accepted that that a fresh limit applied in respect of each new set of government restrictions, but Axa argued that in each case the limit applied to Corbin & King’s business as a whole, and not to each restaurant individually.

On that issue the Court also sided with Corbin & King for two reasons:

1. The Court held that the insureds’ interest was to be “analysed as a composite policy”, and that each premises had their own claim under the policy;
2. On interpretation, the Court noted that the policy referred to cover in respect of “interruption and interference with the business where access to the Premises is restricted”. Given that each of the Premises was in a different location the closure of two restaurants “must be seen on any analysis as two separate incidents”. That was said to be regardless of whether there was one common danger causing the closure, or two separate dangers. Also the word “premises” pointed to each restaurant/café which in itself pointed to separate limits.

Takeaways

This decision will be well-received by policyholders whose claims under Prevention of access clauses have been rejected by their insurers and could lead to policyholders considering requesting their insurers to review claims rejected on this basis.

The decision also marks the first aggregation decision in the Covid-19 BI context. This may significantly increase insurers’ liability in cases where policyholders have insured multiple locations under a single policy.

Policy holders with similar clauses might want to revisit any previous decision of their insurers.

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