The latest commercial court judgment on COVID-19 business interruption claims, involving test cases defended by Allianz, Aviva and Liberty Mutual, has largely gone policyholders’ way.
The judge ruled on seven claims, all but one involving Liberty Mutual wordings.
Lead claimants included hotel operator Gatwick Investments, Hollywood Bowl Group, hospitality group Starboard Hotel, pub chain Fuller, Smith & Turner (Fuller’s), luxury goods distributor Liberty Retail and racecourse and leisure operator Arena Racing’s Bath Racecourse.
Ambassador Theatre Group parent company International Entertainment Holdings’ (IEH) case against Allianz Insurance was also folded into the judgment, which followed a series of hearings last autumn.
The court ruled that Liberty Mutual non-damage denial of access (NDDA) clauses were triggered, with the government counting as a statutory authority, meaning that policies that included this language should respond to losses stemming from government orders.
It further ruled on aggregate arguments set out by insurers, in cases finding that indemnity limits related to losses per occurrence but not necessarily per premises.
It was also found that, in the case of composite policies, liability limits should not apply on aggregate to multiple insured businesses.
The claimants and insurers are expected to thrash out how many occurrences should be paid out for at a later date.
Insurers won out on furlough payment benefits, with judge Mr Justice Jacobs having affirmed Mr Justice Butcher’s finding for insurers in Stonegate’s since-settled £845 million case against its insurers.
“Butcher J considered the leading insurance cases in this area, and I was not persuaded that his analysis was clearly wrong, or indeed wrong at all,” Mr Justice Jacobs said in the judgment. “Once the conclusion is reached that (applying the general law) an insurer would be subrogated to these recoveries, any argument that they are ‘collateral’ cannot be sustained.”
With the Stonegate case having settled prior to appeal, the furlough issue now looks likely to be tackled in the appeal courts in Liberty Retail and Bath Racecourse, lawyers have said.
In the cases of Fuller’s, Gatwick Investments, Hollywood Bowl and Starboard, the court found that business interferences stemmed from action by “police or other statutory authority”, in this instance the government.
The presence of COVID within a one-mile radius was of “equal causal potency and a separate concurrent cause” of the passing of regulations, the court found.
In the Fuller’s case, Aviva, which was 50% on tap for the policy alongside Liberty Mutual, had already paid out £500,000, which it alleged should be the maximum due.
“We are pleased that Fuller’s has been successful in its claim – although there is still much detail to be finalised and, along with the other parties, we are reviewing the wider implications of the judgment,” a Fuller’s spokesperson told Insurance Business.
In Liberty Retail, it was found that pleaded actions were taken by a statutory authority, in line with the policy language, and past, present and future cases of COVID-19 within a one-mile radius could constitute a danger or disturbance.
The Arena Racing Bath Racecourse composite policy, brokered by Bluefin with Allianz, Aviva and Liberty Mutual acting as insurers, was said by the judge to include “very different wording” to the other claims considered.
The insurers had already paid out £2.5 million on the policy at time of proceedings and contended that was the maximum amount due to be paid; however, the judge found that each claimant was entitled to claim up to the limit of £2.5 million for any one loss under denial of access cover.
In the business interruption judgment, Mr Justice Jacobs found that:
Under the Allianz IEH case, the policy that a denial of access clause could be triggered as “a direct result of an incident likely to endanger human life or property within a one-mile radius of the premises in consequence of which access to or use of the premises is prevented or hindered by any policing authority”.
Cases that might have amounted to “an incident likely to endanger human life” must therefore have occurred within one mile of a premises to count under the policy, the judge found, while the term “policing authority” should not extend to orders from the government or the Secretary of State for Health and Social Care.
If a case should amount to an incident likely to endanger human life, the judge found it must have taken place before parliamentary March 21 and March 26 regulations were laid down to have causal relevance, though a policing authority need not have known about the cases prior to the regulations.
In the case of IEH, which had a composite policy, it was found that insureds would be entitled to separate indemnity limits per premises rather than per claimant.
The recent judgment was hailed as “another important stage in the clarification of the rights of policyholders to recover business interruption losses suffered as a result of COVID-19” by Roger Franklin, head of insurance litigation, Edwin Coe, the law firm that represented Corbin & King in its case against AXA, which saw the insurer told to pay out for multiple losses at multiple premises.
“It is now hoped that insurers will finally begin to implement the conclusions of these test cases, rather than run similar arguments when there is no real hope of them succeeding,” Franklin said in comments shared in a Press release.
Allianz, Aviva and Liberty Mutual declined to comment.
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