Whether or not an insurance policy covers losses incurred by reason of business interruption caused by the Covid-19 pandemic is a matter of construction of the policy in question.
The High Court has dismissed a claim for business interruption insurance in Bellini (N/E) Ltd (t/a Bellini) v Brit UW Ltd [2023] EWHC 1545 (Comm).
The claimant was a business which ran a restaurant in Sunderland called Bellini. It claimed against the defendant, its insurer, for losses incurred by business interruption caused by the Covid-19 pandemic. The defendant denied liability because the cover was dependent upon physical damage to the premises or property, which had not occurred. The court tried as a preliminary issue whether under a true construction of the relevant clause there could be cover in the absence of damage as defined in the policy.
The policy provided that the insurer would pay the losses sustained in respect of each item of business interruption caused by damage to property used at the premises during the period of insurance. The insurer agreed to indemnify the claimant for interruption or interference with the business caused by damage arising from any notifiable human infectious or human contagious disease manifested by any person while in the premises or within a 25-mile radius of it. Damage was defined as physical loss, damage or destruction.
The parties agreed the background to the Covid-19 pandemic and the UK government’s response to it and that there had been no physical loss of or damage to the claimant’s premises or property used by it at the premises. The claimant argued that the reasonable intention of the parties was not to limit the extension for notifiable diseases to physical damage.
The principles of contractual construction were not in dispute. An insurance policy, like any other contract, must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood it to mean: see Wood v Capita Insurance Services Ltd [2017] AC 1173. Where a word is expressly defined by the contract, the court will give effect to the agreed definition.
The court concluded that on a proper construction of the relevant clause, there could be no cover in the absence of damage, as defined in the policy, and such damage was physical loss, damage or destruction.
Louise Clark is a property law consultant and mediator
