Key point
- The Commercial Court has stressed the importance of the words actually used when assessing insurance claims for losses caused by the pandemic
Rockliffe Hall is a luxury hotel and golf course in County Durham. As Cockerill J explained in Rockliffe Hall Ltd v Travelers Insurance Company Ltd [2021] EWHC 412 (Comm), RH’s business was “devastated” by Covid-19. It had taken out a business interruption insurance policy with Travelers and claimed under that for the losses it had suffered as a result of the pandemic. Cockerill J was considering a summary judgment and strike out application bought by Travelers which argued that “the terms of its policy are clear and do not cover such losses.”
This is the first High Court judgment on business interruption insurance claims arising out of coronavirus since the issue was analysed more generally by the Supreme Court in Financial Conduct Authority v Arch Insurance Ltd and others [2021] UKSC 1; [2021] EGLR 12 (https://www.egi.co.uk/legal/business-interruption-insurance-hats-off-to-the-supreme-court/). The Supreme Court, which had considered a number of test cases involving different policy wordings, had been supportive of the idea that certain types of policy extension – regarding disease or prevention of access as well as hybrid provisions combining the main elements of both – could cover losses caused by the pandemic.
However, the clauses analysed in Arch weren’t of specific assistance in this case because, as Cockerill J noted at the outset of her judgment, the issue and policy wording in Rockliffe Hall were of a type not considered by the Supreme Court. This dispute related to the scope of cover for losses caused by “Infectious Disease”, a phrase which was expressly defined in the policy by reference to a list of 34 diseases. The problem RH faced was that Covid-19 was not mentioned on that list because the policy was entered into in July 2019, “before Covid-19 had been heard of”.
The arguments
It was this central fact that Travelers relied on to support its summary judgment application. It argued that the cover provided only related to those infectious diseases listed because that list was closed and exhaustive. The policy could have contained some catch-all wording allowing for other diseases to be included, but it did not.
In order to overcome this problem, RH claimed that the list contained two different types of disease: (i) those attributable to a specific cause or pathogen, such as rabies or malaria (which RH called specific diseases); and (ii) diseases which are not so attributable, such as plague and food poisoning (which it called general diseases). “Plague” could therefore be read as a general term for an infectious disease with a high mortality rate rather than any of the types of plague (such as bubonic or pneumonic) actually caused by the bacteria yersinia pestis. It should therefore include Covid-19.
Further, a number of the diseases mentioned – including food poisoning – had a number of possible causes and could have been caused by the specific coronavirus which causes Covid-19 (SARS-CoV-2) such that Covid-19 was caught by the definition. Additionally, the list in the policy should be construed contra proferentem against Travelers and the mixture of specific and general diseases undermined the claim that the list was exhaustive. Rather, there was an ambiguity which meant that the list should be read to include any disease bearing a reasonable similarity to any of the specific or general diseases on the list. This would include Covid-19.
The decision
RH lost, but did so despite the judge rejecting one of Travelers’ key arguments. It argued that the legislative history which underpins the list of infectious diseases was relevant factual matrix evidence. Cockerill J disagreed on the basis that the legislative history was arguably not available to RH. Instead, the judge was influenced by one of the legal principles emphasised by the Supreme Court in Arch: the policy should not be interpreted as if being reviewed by a “pedantic lawyer who will subject the entire policy wording to a minute textual analysis” but “an ordinary policyholder who… is taken to have read through the policy conscientiously in order to understand the cover they were getting”.
Using that test, the judge felt that because the policy covered those diseases mentioned on a list which did not include Covid-19, RH’s claim should be struck out. The judge did not accept RH’s arguments. The argument that plague had a wider meaning was a “clever lawyer’s construct and not a credible suggestion”. The normal reader of the policy would think that plague referred to a specific infectious disease called “plague”. Further, the fact that some diseases could have more than one cause does not mean that the named diseases lacked specificity. All were caused by a pathological process and what mattered was not how the disease was caused, but the specified disease which appeared in the list.
Other arguments – all of which RH suggested pointed to ambiguity – were also dismissed. There was no ambiguity and nothing to be construed contra proferentem.
As the judge concluded: “It would be of no assistance to permit this matter to proceed. Were I to refuse the application… I would simply be condemning the Claimant to fail later, at far greater cost.” She noted that the courts had to apply to the normal principles of the construction of contracts regardless of the circumstances of the pandemic. That may not be much comfort for RH, but it is an important reminder that the words used in all contracts, not just insurance policies, will be decisive when it comes to considering a contract’s actual meaning. That having been said, I suspect there will be more litigation to come on this issue.
Stuart Pemble is a partner at Mills & Reeve
