Business interruption insurance overview: why you might still have a claim


With recent High Court business interruption ("BI") decisions involving Stonegate, Various Eateries and Greggs, businesses forced to close their doors during the pandemic would be wise to re-check their polices. We look at how the court has been approaching business interruption cases, the impact of the decisions for retail and hospitality businesses and three things you should do if you haven’t made a claim.

January 2021 – the FCA test case

In response to the wave of claims in the spring and summer of 2020, and inconsistent responses from insurers, the FCA brought a legal test case focussed on a number of key issues connected to cover for business interruption caused by infectious or notifiable diseases, prevention of access and public authority restrictions. The purpose was to provide clarity on certain typical policy wordings. The FCA selected representative sample policy wordings and put forward policyholders’ arguments on their behalf.

Following the High Court's decision, the case leap-frogged to the Supreme Court with both the insurers and the FCA appealing different aspects of the judgment. The FCA was successful in many of its arguments at first instance and on appeal. The potential for cover was confirmed in respect of disease clauses as well as prevention of access clauses where public authority intervention prevented or hindered access to business premises. Although strictly denial of access clauses had not been part of the FCA's appeal, the Supreme Court confirmed that its approach to causation should apply to all the types of policies it had considered. The approach being that each case of Covid-19 was an equal and effective cause of the national restrictions and, therefore, clauses could cover the losses arising notwithstanding the fact that there were cases occurring outside of a specified geographical limit. The Supreme Court rejected the insurers' appeal and specifically causation arguments put forward.

The decision was favourable for those with policies mirroring the wording considered in the test case and the broad interpretation of clauses favoured by the Supreme Court provided others with potential arguments for revisiting their claims with insurers.

February 2022 - Corbin & King Ltd v Axa

This case concerned companies connected to the well-known restaurateurs Jeremy King and Chris Corbin, founders of The Wolseley, The Delaunay and Brasserie Zedel (to name a few). A combined business insurance policy had been issued by Axa to 11 named companies and covered numerous premises.

The court was asked to consider (1) whether the denial of access clause in the policy provided cover to the policy holders, and (2) whether the policy limit applied in respect of all premises, or only for each set of premises held by the different companies. The judge decided that while the policy excluded cover where a restriction or hindrance on access resulted from certain listed diseases, Covid-19 was not one of them and could constitute "a danger… at your premises or within a 1 mile radius of your premises" as per the policy wording. The danger posed by Covid-19 resulted in Government action which closed the businesses and caused the losses to be suffered.

As for the policy limit, the court decided that the policy was a composite policy to be treated as separate contracts of insurance between each of the companies and Axa, so the limit should apply to each of the companies separately.

October 2022 – Stonegate, Various Eateries and Greggs

In contrast to the policyholder-friendly decisions above, this recent trio of judgments were arguably less clear cut. Stonegate, Various Eateries and Greggs were three separate claims with considerable overlap in terms of the issues, evidence and arguments. Judgments in all three were handed down on 17 October 2022.

Key issues in these cases included (1) the relevant trigger under the insuring clauses in the policies, (2) whether the losses claimed could be aggregated to one or more single occurrences, (3) whether losses were proximately caused by events which occurred within the policy periods, and (4) whether Government support received should be taken into account, limiting the indemnity under the policies.

Collectively the decisions have largely been reported as pro-insurer. Certainly, the court's decision that Government assistance such as furlough payments and business rates relief should be taken into account to avoid double indemnity, is a significant blow to policy holders. More broadly the decisions in Stonegate and Various Eateries found largely in favour in the insurers on the causation issues and found there to be only a small number of aggregating occurrences.

Greggs, however, successfully argued that it was entitled to a separate "Single Business Interruption Limit" of £2.5m each time the Government adopted a major Covid-19 restriction measure which affected Greggs' business. The insurer had argued that there was only one single occurrence so that Greggs could only claim up to one £2.5m limit for all of its Covid-19 BI losses. This was rejected by the judge. 

What's next?

One thing is for sure, this is not the end of the story for Covid-19 related BI claims. Stonegate are expected to appeal the High Court decision and we know that there is more significant litigation to come. The court will shortly be considering important issues of causation and construction in connection with premises cover in a claim brought by Lumi Power Yoga Ltd against the insurer Covea. Similar issues arise in a claim against Royal & Sun Alliance issued by London International Exhibition Centre plc. Add to this the BI claims that have not yet been made and those still being considered by insurers, and it seems likely there will be plenty of activity in this area over the next few months and perhaps even years.

What to do if you think you might have a claim

1.    Dig out your policy. The law in this area is still developing so if you haven’t yet made a successful claim, it is worth keeping your position under review.

2.    Contact your insurer. You may not have realised you could claim, or you may have been told previously that you couldn't, but it may be worth asking the question again. The FCA was clear after the test case decision that insurers should reconsider previously rejected claims. 

3.    Get advice. This remains a complex and developing area of the law and interpreting the effect of policy wording within a particular factual context requires careful consideration and expertise.   

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