Covid-19 has caused business interruption for many over the past year and companies will be hoping to bring successful claims under their business interruption insurance policies for at least part of the losses suffered. The question many businesses have been asking recently is whether business interruption insurance will cover the losses they’ve suffered because of Covid-19. A recent case highlights how infectious disease definitions in insurance policies could be key in whether an insurance claim is successful.
The FCA test case
The Financial Conduct Authority (FCA) brought a test case before the High Court last September to clarify whether businesses could rely on infectious or notifiable disease clauses (Disease Clause), and/or prevention of access and public authority closures clauses (Prevention of Access Clauses), for business interruption caused by Covid-19.
The FCA presented a sample of 21 policies issued by eight different insurers and presented policy holders’ arguments as to why the business interruption clauses should be applicable.
The parties were unable to resolve matters and the case went before the Supreme Court in January 2021. The Supreme Court held that in many cases, where a Disease Clause expressly refers to an externally maintained and dynamic list regularly updated by the government, the policy should cover losses suffered because of Covid-19.
Rockliffe Hall Ltd v Travelers Insurance Company Ltd
Following the FCA test case, Rockliffe Hall Ltd issued a claim against its insurers, Travelers Insurance Company Ltd, alleging that they were entitled to claim for losses suffered as a result of Covid-19 under an infectious disease business interruption clause.
It was argued that because the diseases listed in the insurance policy were similar to the notifiable diseases referred to in the FCA test case, Covid-19 should be deemed included under the policy.
The judge disagreed, and the court dismissed the claim on the basis that the insurance policy contained a specific definition of Infectious Disease with an exhaustive list of diseases and, given that Covid-19 was not specifically listed, the FCA test case was not applicable, and the insurer was not required to pay out under the policy.
What does this mean for your business?
The Rockliffe case was the first case responding to an Infectious Disease clause that was specifically defined and contained a list of included diseases. This illustrates that the FCA test case cannot be relied upon in cases where an exhaustive list of infectious diseases is provided within an insurance policy. It is necessary to check
- Does the clause define an exhaustive list of infectious diseases? If so, following the Rockliffe case, it is unlikely that this alone can be relied upon.
- Does the clause refer to an externally maintained and dynamic list regularly updated by the government? If so, you may be able to rely on the FCA test case.
The FCA, Supreme Court and insurance companies that were involved in the FCA test case are working on a list of directives to help guide future claims of this nature.
This article was co-written by lawyer Elliot Nathan and trainee lawyer, Olivia Harris.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.