Business Interruption claim struck - COVID-19 not within “Infectious Disease” clause

A recent English decision proves that wording in insurance policies is paramount for companies pursuing business interruption claims.

11 March 2021

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The recent Supreme Court judgment in the FCA business interruption test case was hailed as a victory for the insured customers. It was generally considered that the Supreme Court’s ruling and the subsequent FCA guidance would lead to insurers paying out on more of these BI claims. However, each claim needs to be judged on its own merits and some BI claims still may not necessarily be successful.

A recent English decision provides a good example.

In Rockcliffe Hall v Travelers Insurance, Mrs Justice Cockerill, sitting in the Commercial Court in Newcastle, struck out a hotel's BI claim against their insurers for losses resulting from COVID-19. She determined that the claim was not covered as the policy’s definition of "Infectious Disease" was specifically defined by means of an exhaustive list.  Not unsurprisingly, COVID-19 was not listed.

Cockerill J determined that the clause only covered loss resulting from one of the diseases specifically listed in the policy. The list was closed and exhaustive.  It began with the words "Infectious Disease means" instead of, for example, "includes".  She rejected a number of arguments that were put forward by the insured’s legal team, namely:-

  1. The list included COVID-19 because “plague” was included, which could cover any infectious disease with a high mortality rate, epidemic or pandemic.
  2. The list included COVID-19 because some of the listed diseases, such as acute encephalitis and meningitis, were capable of or likely to be caused by COVID-19.
  3. The list was similar to the list of Notifiable Diseases in the policies considered in the FCA test case so that a disease was included if it bore a reasonable similarity to the diseases listed.

This is the first reported decision dealing with the issue of whether there is insurance cover where the policy includes an infectious disease clause responding to a specified list of diseases which does not include COVID-19. This issue was not considered in the FCA test case.

What should we take from this?

The wording of each particular policy is paramount. In the case of any wording not specifically considered by the Supreme Court in the FCA test case, careful consideration is required.   

Balfour+Manson can offer advice on insurance issues, including business interruption claims. If you need any input, please contact Gordon Deane on 07876 658 912 or Gordon.deane@balfour-manson.co.uk. Gordon is dual-qualified in Scotland and England.

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