Business interruption insurance claims have arrived at the door of some of England’s biggest football clubs and the world’s biggest insurers. In an unlikely alliance, Arsenal, Aston Villa, Brighton and Hove Albion, Crystal Palace, Leicester City, Liverpool, Tottenham and West Ham have come together to bring multi-party proceedings against their insurers for business interruption losses during the COVID-19 pandemic.

The clubs are seeking an indemnity for their losses and for the Court to rule on how limitation of liability clauses in their insurance contracts apply.

Background

This case concerns the coverage under a notifiable disease clause, an enforced closure clause and a hinderance of use clause. The insurers initially denied any liability until judgment in the FCA test case was handed down, when they conceded that cover existed in principle. The dispute has since centred around the extent of the insurers’ financial liability under the policies.

Claim for indemnity 

The football clubs are claiming an indemnity from the insurance companies for their losses under three clauses:

• notifiable disease clause – this clause provides cover for business losses caused by interruption as result of COVID-19 occurring within the vicinity of the premises. This clause is essentially identical to the wording that has become known as Marsh/Reliance or RSA 4 policy wording which was held to provide coverage in the FCA test case; 
• enforced closure clause – this clause provides cover for business losses caused by interruption as a result of the enforced closure of the premises by governmental authority or local authority for health reasons; and
• hinderance of use clause – this clause provides cover for business losses caused by interruption as a result of actions or advice from a governmental authority which prevents the use or access to the premises.

The insurers’ Defences are not available so we are unable to comment on their responses to these claims.

Limitation of liability

The football clubs’ contracts of insurance provide for up to £2.5 million to be payable for a “Single Business Interruption Loss” under both the notifiable disease clause and enforced closure clause and £500,000 under the hindrance of use clause.

“Single Business Interruption Loss” is defined in the contracts of insurance as:

all Business Interruption Loss and Business Interruption Costs & Expenses […] and any amounts payable under Extensions that arise from, are attributable to or are in connection with a single occurrence (emphasis added)

The football clubs argue that “occurrence” means a period of interruption to the business and that they suffered multiple Single Business Interruption Losses. On this interpretation, this could mean that a fresh limit would apply to each period of interruption – for example, a fresh limit for each set of government restrictions.

Although the insurers’ Defences are not available, it is understood that they have argued that the term “occurrence” refers to an originating cause. If the Court found in their favour, it might mean that the limits would apply to all losses flowing from that one originating event – for example, the outbreak of the pandemic or an individual case of COVID-19. A finding in the insurers’ favour on this point might limit the recovery for all COVID-19 business losses under the relevant clause to the relevant limits only.

The difference in value would soon run into the millions – enough to buy a few Erling Haalands.

Conclusion 

As had been predicted, the FCA test case was only the beginning of disputes in this space and there appears to be a long tail to COVID insurance disputes. Since the FCA test case, the claims have also highlighted key issues beyond whether coverage is available – namely, how those loses are calculated. 

In our previous blog on Corbin & King v Axa, we discussed how the Court dealt with calculation of losses in the context of businesses with multiple premises. The current case focusses on limitation of liability for the occurrence of events leading to losses. This case will hopefully clarify the next piece in the puzzle concerning the calculation of losses.

One thing is for sure, the full-time whistle is a long way away in the business interruption insurance disputes space. We are not yet even close to “Fergie Time”.