The Covid-19 pandemic has led to widespread disruption and economic volatility which had a significant impact on businesses. Particularly, the small and medium-sized enterprises (SMEs) have suffered a significant level of financial loss. A large number of affected businesses have made claims for the losses under their business interruption insurance policies. However, there is uncertainty over the business interruption (BI) insurance policies’ cover in the context of Covid-19 claims.
Recently, the Newcastle Circuit Commercial Court (Court) has struck out a BI losses claim in consequence of the Covid-19 pandemic where the policy provided cover for BI losses in consequence of “Infectious Disease”. (Rockliffe Hall Ltd v Travelers Insurance Company Ltd  EWHC 412)
The decision made by the Court on Rockliffe Hall Ltd v Travelers Insurance Company Ltd is an important benchmark for the business owners and insurance industry as it is the first decision which deals with the question of “whether there is BI insurance cover where the policy includes infectious disease clauses responding to an exhaustive list of diseases which does not include Covid-19.”
The wording of the relevant clause in the BI insurance policy
The BI insurance policy obtained by Rockliffe Hall Ltd (Claimant) included a non-damage BI cover extension providing cover for BI loss in consequence of, among other things:
- “Infectious Disease manifested by any person whilst at the Business Premises which results in closure of the whole or part of the Business Premises by the order of an appropriate competent authority.
- An outbreak of Infectious Disease within 10 miles of the Business Premises.”
The term “Infectious Disease” was defined in the policy by way of reference to an exhaustive list of 34 specified diseases including the “plague”. The Claimant’s argument was “the plague” refers to a general term for an infectious disease with a high mortality rate which includes an epidemic or pandemic. Travelers Insurance Company Ltd.’s (Defendant) counter-argument was the fact that the cover provided by the policy extends only to loss resulting from one of the diseases specified in the relevant clause’s wording, and that the list contained in the policy for the diseases is closed and exhaustive.
The Court’s Approach
The Court held that the clause mentioned above only covered the loss resulting from one of the diseases specified in the policy. The Court stated that the “Definitions in statutes and deeds can be exhaustive or non-exhaustive. Non-exhaustive definitions are usually prefaced by the word “include”. More often, however, a definition is intended to be exhaustive, and it will then generally begin with the word “mean” or “means”. Therefore, noted that “the appearance of the diseases list contained in the policy is closed, exhaustive as it began with the words “Infectious Disease means”.”
The Court also dismissed the Claimant’s argument that the clause covers Covid-19 as “plague” was part of the diseases listed in the policy. The Court held that “the word plague was obviously intended to refer to a specific disease caused by Yersinia pestis bacteria” and that definition does not cover Covid-19.
The Court’s decision in Rockliffe Hall Ltd v Travelers Insurance Company Ltd case proves that a BI insurance policy’s wording is one of the key factors which defines whether a policy provides cover for BI losses consequential to Covid-19 or not. The decision also emphasizes the importance of reviewing the terms of your BI insurance policy to ensure that you have clear and correct wording embedded in the policy and have protection against potential events including Covid-19 and many different causes of business interruption.
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This is not legal advice; it is intended to provide information of general interest about current legal issues.