The High Court Rules On Covid-19 Business Interruption Claim By The Clarence Hotel

• Published date: 31 May 2021
• Subject Matter: Insurance, Coronavirus (COVID-19), Insurance Laws and Products, Government Measures, Operational Impacts and Strategy
• Law Firm: Ronan Daly Jermyn
• Author: Ms Lisa Mansfield and Aoife Farrell

In a recent judgment, the High Court has ruled that a hotel is not covered for losses from the Covid-19 pandemic under their business interruption insurance policy with AXA.

McDonald J. handed down his decision in Brushfield Limited (t/a The Clarence Hotel) -v- Arachas Corporate Brokers Limited and AXA Insurance Designated Company¹, on 19 April 2021.

Case Facts

The plaintiff who trades under the title of "The Clarence Hotel", entered into an insurance contract with AXA on 1 April 2019 which contained cover with regards to business interruption. The policy comprised of two relevant non-damage business interruption extensions: MSDE clause (murder, suicide, or disease clause) and denial of access non-damage clause. The former clause contained a list of specified human infectious diseases covered under the policy. However, notably Covid-19 was not listed. The latter clause responded where losses are sustained arising from "the actions taken by the police or any other statutory body in response to a danger or disturbance at your premises or within a 1-mile radius of your premises".

Main Issues

1. Whether the MSDE clause provided cover for business interruption losses caused by Covid-19, even though Covid-19 (or any other variant) was not directly listed in the clause.
2. Whether the MSDE clause provided cover for business interruption losses caused by acute encephalitis which is brought about by Covid-19 and which may have been displayed by any person within a 25-mile radius of the premises.
3. Whether Covid-19 represents a "defect in the drains or other sanitary arrangement at the premises" for the purposes of the MSDE clause.
4. Whether Covid-19 represents a "danger or disturbance" for the purposes of the denial of access clause:

1. Whether it is a requirement for the outbreak of Covid-19 to be specific to the premises or an area within a 1-mile radius of the premises.
2. Whether it is a requirement for actions to be taken by the police or any other statutory body in response to this outbreak either at or within a 1-mile radius of the premises.

5. Whether the Government measures and regulations introduced in response to Covid-19 can represent an action taken by the police or statutory body in response to an outbreak either at or within a 1-mile radius of the premises.

Decision

The High Court held that cover for loss of business income resulting from Government regulations and measures put in place in response to Covid-19, is not available under the specific terms of the...