Business Interruption Insurance -The 'but for' test

Orient-Express Hotels v. Assicurazioni Generali SpA (UK Branch)

Commercial Court, 27 May 2010

The case concerned a claim under a combined property policy covering physical damage and business interruption in respect of the Windsor Court Hotel, a 23-storey property in the central business district of New Orleans.

The property suffered significant physical damage from wind and water in the course of Hurricane Katrina, and it was closed throughout September and October 2005. The Hotel re-opened on 1 November 2005, albeit not fully repaired and with its services and amenities not fully operational. The insured sustained significant business interruption losses.

The basic insuring clauses in the policy were in fairly standard terms. Specifically, the insurers agreed to indemnify:

a)

under the Material Damage and Machinery Breakdown Sections against direct physical loss destruction or damage except as excluded herein to Property as defined herein...;

b)

under the Business Interruption Section against loss due to interruption or interference with the Business directly arising from Damage and as otherwise more specifically detailed herein.

As to the adjustment of BI losses, the policy also contained a "Trends Clause" as follows:

"... Gross Revenue and Standard Revenue adjustments shall be made as may be necessary to provide for the trend of the Business and for variations in or special circumstances affecting the Business either before or after the Damage or which would have affected the Business had the Damage not occurred so that the figures thus adjusted shall represent as nearly as may be reasonably practicable...