The High Court has delivered its first test case judgment providing some certainty on the scope of insurance cover for businesses being hit by Covid 19. Subject to any revision on appeal, this judgment is the authority to define the meaning of “occurrence” of a contagious disease such as the Covid 19 virus. The court rejected the argument raised by the insurance industry that “occurrence” was limited to localised events that have a geographical connection with the affected business and that these clauses were never intended to cover losses caused by a nationwide and pandemic event. This ruling is not at all ground breaking and is in line with the pre-existing law on the interpretation of insurance policies. Clauses are interpreted strictly in accordance with their wording and any attempt to extend or restrict the meaning of cover based on an unwritten intention will be rejected.
Whilst this is excellent news for businesses that had policies with the appropriate wording, these policies seem to be rather rare. The FCA estimates pay outs approximating £1.2billion.
The devil in insurance policies is in the minute details. The vast majority of business interruption policyholders will not benefit from the ruling since most policies contain explicit restrictions and require multiple factors to be present for an insured event to occur. The policies with wide cover were always rare and are now, not surprisingly, an extinct creature.
Any policyholder lucky enough to have wide cover should still be aware of notification provisions; anyone who has not brought a claim should act without delay.