Two questions arose in this application. First, whether a Combined Care Home policy provided business interruption cover, where the insured had purchased a residential property with a view to converting it into a care home. Second, if the policy afforded business interruption cover, whether the respondent was in fact carrying on a business at the premises when the property was damaged after water pipes burst during the renovation.
The Court answered both questions in favour of Jason’s client.
On the first issue, although the policy schedule referred to Section A of the underlying policy wording (entitled “Property Damage & Business Interruption”) as being “Insured”, the Court agreed that “the conscientious reader would necessarily continue to read the remainder of the Schedule and Policy Wording in order to establish the actual details of the cover provided to the Insured under the operative Section of the Policy” (§85). In doing so, they would find that: (a) Section A of the underlying wording was divided into 17 parts and in fact offered two separate forms of insurance, Property Damage and Business Interruption; (b) the fact that Section A of the wording was said in the schedule to be “Insured” would not therefore automatically necessitate that each of the 17 parts of Section A were insured; (c) the “Policy Limits” section of the policy schedule only referred to there being cover in respect of property values, as opposed to business revenues; (d) the “Sum Insured” in the policy schedule only stated sums for the building, contents and computers; (e) the policy schedule did not identify a schedule of values and deductibles for any cover provided under Section A of the underlying wording; and (f) the policy excess element of the schedule for Section A cover contained a cross-reference to the property value schedule (§86 – §94). The Court concluded that “nowhere within the Schedule would the conscientious reader find the critical information which any insured Policyholder would require in respect of the Sum Insured and the Excess if the Policy also afforded cover against Business Interruption” (§100).
On the second issue, the Court found that even if the policy had afforded business interruption cover, no business was being carried out at the insured premises at the time of the event of damage relied on (the burst water pipes), and so there was no insured interest (§138 – §140). The respondent’s argument that the property was being developed in the course of a business, and the development was part of the business to enable it to earn revenue, was rejected (§144 – §147). The respondent’s case failed to satisfy the definition of “Business” in the policy (§147), and “it is inherent in the concept of Business Interruption that there is a business, in the sense of a corporate entity offering goods and services in exchange for money, that is ongoing when the interruption occurs” (§148).
Jason Robinson KC was instructed by Francis Mackie of Browne Jacobson LLP.
