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Covid BI insurance: the latest instalment

26th Jun 2023

Bellini (N/E) Ltd v Brit UW Limited [2023] EWHC 1545 (Comm)

The High Court has held that a business interruption insurance policy containing a disease clause on similar terms to some of those considered in the FCA Test Case did not provide cover in the absence of physical damage to property. Harry Wright appeared for the successful insurer. The clause, which is similar to the QBE 1 wording in the FCA Test Case, provided:

8.2.6 Murder, suicide or disease

We shall indemnify you in respect of interruption of or interference with the business caused by damage, as defined in clause 8.1, arising from:

(a) any human infectious or human contagious disease (excluding Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related condition) an outbreak of which the local authority has stipulated shall be notified to them manifested by any person whilst in the premises or within a twenty five (25) mile radius of it;

(b) murder or suicide in the premises;

(c) injury or illness sustained by any person arising from or traceable to foreign or injurious matter in food or drink provided in the premises;

(d) vermin or pests in the premises;

(e) the closing of the whole or part of the premises by order of a competent public authority consequent upon defect in the drains or other sanitary arrangements at the premises.

The insurance by this clause shall only apply for the period beginning with the occurrence of the loss and ending not later than three (3) months thereafter during which the results of the business shall be affected in consequence of the damage.”

The word “damage” was defined as “physical loss, physical damage, physical destruction”. It was common ground that there had been no such damage. The insurer denied that there could be cover in the absence of damage. The Claimant contended that there was no need for damage, since otherwise the coverage created by this clause would be illusory. It argued that the word “damage” should not take its defined meaning, but instead referred to the effects of the perils listed in sub-paragraphs (a) to (e).

This point was tried as a preliminary issue. Clare Ambrose (sitting as a Deputy High Court Judge) held that the clause did not provide cover in the absence of physical damage to property. It was therefore different to the “non-damage” clauses considered in the FCA Test Case. The Court held that the Claimant’s case was an attempt to rewrite the cover on terms which did not require damage, which would be contrary to the parties’ agreement and the established approach to contractual construction (see [29]). It would also be wrong to apply to a defined term something other than its defined meaning (see [30]). The preliminary answer was therefore answered in the insurer’s favour.

Harry Wright was instructed by Leon Taylor, Oliver Saunders and Charlotte Marks of DLA Piper LLP; and by Gaynor Biggins and Davinder Chhatwal of Brit.

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