There has been a lot of comment recently following the Supreme Court decision on whether Business Interruption insurance should provide cover for closure of a business based on the Government Covid-19 advice. We at GS Group have been following this court case closely and now the final decision has been made we are in a position to assist our clients who may have a claim under their policy.
The first point to note is this decision does not mean every BI policy will have to pay out for losses arising from closure of a business during lockdown, indeed many will still not provide cover. What the judgement does, is provide clarification on the wording of 21 types of policies issued by 8 insurers, and this decision on the wordings would also be applied to other similarly worded policies. Where a policy is clear on either providing or excluding cover the recent court decision will have no effect. If a policy wording is ambiguous the judgement now gives us a measure on which a clear decision can be made if policy cover should apply or not. It will depend on each policy wording, and the cover and exclusions therein, whether a claim can be made for losses suffered as a result of enforced closure of a business due to Government action.
It should be noted that few, if any, Insurers ever intended to provide cover for closure due to a pandemic under a general commercial insurance policy. The Supreme Court decision is based on the way certain types of policy have been worded which left them open to challenge. If the policy has been written in a clear and concise manner with no room for ambiguity, then the question of whether cover is provided or not will be clear.
If you have already intimidated a business interruption claim to us, we will progress this on your behalf. If you now think you may have a claim please contact us to discuss your particular policy with you and advise you on how to proceed.
Full details of this judgement can be found on the FCA website
GS GROUP SUMMARY OF THE SUPREME COURT RULING ON BUSINESS INTERRUPTION
With the handing down of the Supreme Court Judgement on Friday (where it unanimously dismissed Insurers’ appeals and allowed all four of the FCA’s appeals) it is estimated that in addition to the 21 lead policies considered by the Court some 700 types of policies across 60 plus insurers and 370,000 policyholders could potentially be affected by the outcome of this litigation .
The types of clauses considered:
Whilst each policy is different and must be looked at individually, the critical “disease clauses” commonly refer to an occurrence of a notifiable disease within a specified radius eg 25 miles. The Supreme Court in an innovative approach decided that an individual occurrence of the disease within the specified radius, in combination with the thousands of other cases outside the radius was a concurrent proximate cause of the loss and is sufficient therefore to trigger the policy. In essence , it would be enough for a policyholder to show that its business interruption was a result of the Government action which was taken in response to ALL cases of Covid – 19 as long as they could evidence at least one case of Covid-19 at the time within the geographical limit.
Prevention of Access Clauses / Hybrid Clauses
Here the Supreme Court rejected the High Court’s interpretation as too narrow. The High Court had originally said that this requirement was only satisfied if the measure was expressed in mandatory terms and had the force of law. The Supreme Court however stated that an instruction given by a public authority may amount to a “restriction imposed” if it carries the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers. It should be noted that the Supreme Court did say that the wider definition of “restrictions imposed” did not extend to policies which required “enforced closure” which would not be triggered by advice or exhortations.
The purpose of a Trends clause is to arrive at the results that won’t have been achieved but for the Insured peril and circumstances arising out of the same underlying or originating cause. The Supreme Court ruled that Trends clauses should not be interpreted to reduce the level of cover on the basis that the business would have suffered a reduction in turnover anyway due to uninsured losses which were “ inextricably linked” to the insured peril.
On Pre -Trigger losses , whilst the High Court had determined that Insurers could account for a downturn in trade due to the effects of Covid-19 prior to cover being triggered , the Supreme Court did not agree with this approach.