The Court of Appeal has handed down judgment in UnipolSai Assicurazioni SpA v Covéa Insurance Plc [2024] EWCA Civ 1110 (30 September 2024), providing authoritative confirmation of the recoverability of Covid-19 business interruption losses under Property Catastrophe XL Reinsurance.
Covéa provided insurance cover to businesses running children’s nurseries and other childcare facilities. Its nursery care cover insured against a wide range of risks commonly found in policies written by the property departments of UK insurers, including cover for business interruption caused by perils other than physical damage to insured property. Policyholders sustained business interruption losses when, in response to the Covid-19 pandemic, the UK Government instructed schools, colleges and early years facilities to close with effect from 20 March 2020. Covéa paid substantial sums to its policyholders and sought indemnity from its Property Catastrophe XL reinsurer, UnipolSai.
UnipolSai raised two objections of principle to payment. First, it argued that Covid-19 losses did not arise out of and were not directly occasioned by a ‘catastrophe’. Secondly, it contended that, for the purposes of aggregation, the ‘Hours Clause’ in the treaty had the effect of limiting any recovery of Covid-19 business interruption losses to payments in respect of the closure of insured premises during a stipulated period of 168 hours (on the basis that no ‘individual loss’ which ‘occurs’ outside that period could be included).
Alistair Schaff KC and Simon Kerr, acting for Covéa, argued in arbitration that the outbreak of cases of Covid-19 in the UK in the period immediately preceding the government closure instruction was a ‘catastrophe’, and that the ‘Hours Clause’ did not limit indemnity as contended by UnipolSai, since it was sufficient that the individual (physical damage or business interruption) loss should first occur during that period, even if the financial loss in question continues to develop over time subsequently. The tribunal agreed.
UnipolSai’s section 69 appeal against that decision was rejected by Foxton J in January 2020 and, in a robust endorsement of both the arbitral award and the Commercial Court judgment, the Court of Appeal has now unanimously rejected its further appeal. The Chancellor of the High Court, Sir Julian Flaux (with whom Newey and Popplewell LJJ agreed) has held that the judge’s conclusion (in accordance with the tribunal’s findings) that the outbreak was a ‘catastrophe’ was plainly correct, the findings involved no error of law, and the judge’s analysis cannot be faulted. The Court also agreed with Covéa’s case on the proper construction of the ‘Hours Clause’, holding the analysis and conclusions of the judge (following those of the tribunal) to be correct as a matter of principle, supported by undisputed expert evidence as to market practice, and consistent with the terms of the reinsurance, first principles of ‘losses occurring’ (re)insurance, Covid-19 insurance jurisprudence, and commercial sense.
Alistair and Simon were instructed by Slaughter & May (Efstathios Michael).
