More News From The English Court On Business Interruption Insurance And COVID-19

• Published date: 20 October 2020
• Subject Matter: Insurance, Real Estate and Construction, Insurance Laws and Products, Construction & Planning
• Law Firm: Quadrant Chambers
• Author: Ms Poonam Melwani QC and Tim Marland

OVERVIEW

In two recent decisions,The Financial Conduct Authority v Arch Insurance (UK) Ltd and others [2020] EWHC 2448 (Comm) ('the FCA Test Case') and TKC London Limited v Allianz Insurance Plc [2020] EWHC 2710 (Comm) ('TKC'), the English Court has considered various standard form business interruption wordings and the extent to which they respond to the Covid-19 pandemic and ensuing government measures to contain the spread of the virus, notably the enforced closure of businesses. The FCA Test Case considered the engagement of various 'non-damage' business interruption extensions to traditional cover. TKC confirms the prevailing orthodoxy, at least in this jurisdiction, that 'traditional' business interruption insurance does not respond to business interruption losses caused by the temporary closure of the business where there has been no physical damage.

(1) The FCA Test Case

The FCA test case has been the subject of a proliferation of articles and comment since the judgment was produced. As the overall result was something of a 'score draw' and given its undoubted significance, the judgment is unsurprisingly the subject of appeal. It is not the intention of this article to review the judgment as a whole, but to focus on two aspects which are of wider application than the specific context of the non-damage extensions under consideration. These are: (1) the proper approach to the construction of exclusions within a policy of insurance (2) the Court's consideration of Orient-Express Hotels Ltd v Assicurazioni Generali SpA [2010] EWHC 1186 (Comm)

Exclusions in insurance policies

At paragraphs [62] to [79] the FCA Test Case provides a useful and detailed exposition of the approach to construction of insurance policies and the provisions therein, including exclusion clauses. There has in the past often been a tendency to approach exclusion clauses in insurance policies in the same manner as contractual exemptions from liability ie to adopt a narrow construction, to apply (where appropriate) the contra proferentem approach etc. In the FCA Test Case the Court confirmed that contra proferentem is now largely obsolete ("it is clear that that principle, if it still has any validity." para.[71]). The Court held that the approach to construction of exclusion clauses in insurance policies was "correctly summarised" by Peter MacDonald Eggers QC sitting as a Deputy High Court Judge inCrowden v QBE Insurance (Europe) Limited [2017] EWHC 2597 (Comm). In that case the...