The Court has recently provided further guidance on how it will approach disease clauses in the context of business interruption insurance claims caused by Covid-19, in the case of Rockliffe Hall Ltd v Travelers Insurance Company Ltd.
Rockliffe Hall (“Rockliffe”) is a hotel and golf course business. Like many other businesses in the hospitality sector, it suffered significant losses as a result of the Covid-19 pandemic. Rockliffe sought to recover some of its losses under its business interruption insurance cover which it had taken out with Travelers Insurance.
Travelers Insurance refused Rockliffe’s claim. They argued that the insurance policy did not cover Coronavirus and therefore they were under no obligation to pay out under the policy.
What did the clause actually say?
The policy provides cover for interruption to business directly caused by an outbreak of an “Infectious Disease.” The term “Infectious Disease” was defined in the policy document by way of reference to a list of 34 specified diseases including “plague”.
Rockliffe argued that “plague” should be read as a general term for an infectious disease with a high mortality rate, epidemic or pandemic. In contrast, Travelers Insurance argued that “plague” should be more narrowly interpreted as a specific infectious disease caused by Yersinia pestis bacteria.
Approach taken by the Court
Mrs Justice Cockerill agreed with the Travelers Insurance and struck out Rockliffe’s claim. The main reasons for her decision were as follows:-
- The policy contained an exhaustive list and there was no sweeper clause to cover similar diseases; and
- “Plague” was listed in the section which included other specific diseases such as typhus and cholera.
Mrs Justice Cockerill therefore concluded that the term “plague” was obviously intended to refer to a specific disease rather than applying on a general basis. She did comment however that a different outcome may have been reached if wider events such as ‘famine’, war’ and ‘pestilence’ were included within the list.
Comment on business interruption claims
Whilst the FCA test case provided some useful clarity as to business interruption cover policy wording, this case shows that not all issues have been resolved and judicial guidance will still be required as to the interpretation of individual clauses.
Many businesses are understandably keen to investigate any ways in which they can recover money under their insurance policy. Caution should be exercised before issuing court proceedings however. If the claim is struck out because it has no reasonable prospects of success, there is a high risk that the claimant will be ordered to pay the other party’s costs. It is therefore important that any claim is carefully thought out and a robust risk assessment carried out before proceedings are issued.
This case also illustrates the importance of reviewing your insurance policy terms to ensure that you have sufficient protection against potential loss events.
If you are struggling with a claim for business interruption see our helpful fact sheet here.