Non-Damage Denial Of Access Clause Can Respond To Covid Losses After All'

• Published date: 22 April 2022
• Subject Matter: Litigation, Mediation & Arbitration, Coronavirus (COVID-19), Arbitration & Dispute Resolution, Insurance Claims, Operational Impacts and Strategy
• Law Firm: Gowling WLG
• Author: Ms Samantha Holland and Teresa Edwards

Policyholders who suffered business interruption losses as a result of the COVID-19 pandemic should look again at their business insurance policies. The Commercial Court, in Corbin & King Ltd & Ors v AXA Insurance UK Plc (Rev1) [2022] EWHC 409 (Comm) (25 February 2022) (bailii.org), found that a Non-Damage Denial of Access (NDDA) clause was capable of providing cover for business interruption losses suffered by the policyholder as a result of the restrictions to access caused by the pandemic.

Background to this case

In FCA v Arch Insurance (UK) Ltd and others (2020), the FCA Test Case brought on behalf of small and medium sized businesses (SMEs) who had suffered financial losses arising from business interruption caused by the pandemic, the Divisional Court found that in general NDDA clauses did not provide cover for such losses, which we explored in our earlier article. The wording of the clauses typically included "emergency in the vicinity", "danger or disturbance in the vicinity", "injury in the vicinity" and "incident within 1 mile/the vicinity". As a result the clauses were held to provide a narrow localised form of cover in respect of a local event, not cover for a national (or international) pandemic.

The decision on the NDDA clauses was not appealed to the Supreme Court, although a number of other findings were. These included the finding of the Divisional Court in relation to the 'disease clauses' (clauses which provided cover for business interruption losses arising from disease within the geographical limit). While considering causation in relation to those clauses (among others) the Supreme Court held that each case of COVID-19 was an equal and effective cause of the restrictions imposed by the government. The but-for test was not determinative in ascertaining whether the test for causation had been satisfied and it would be sufficient to establish a localised occurrence of the disease in combination with the wider pandemic, even if that localised occurrence would not have been sufficient on its own.

The facts

In Corbin & King Ltd and Others v AXA Insurance UK PLC the insureds were the owners and operators of a number of well-known restaurants, cafes and other establishments in London. They suffered losses because of the COVID-19 pandemic and the government regulations preventing access to their premises as a result. They sought to claim under the Combined Business Insurance Policy (the Policy) issued to them by the defendants, AXA.

The NDDA...