London International Exhibition Centre plc v Allianz Insurance plc and others

Insurance – Business interruption policy – Causation – Appellants issuing policies covering loss resulting from outbreak of disease at business premises – Respondent policyholders suffering losses following imposition of government measures to contain Covid-19 – Whether respondents entitled to indemnity where “but for” test not satisfied – Whether losses properly regarded as resulting from combination of insured peril and similar uninsured events – Appeals and cross-appeals dismissed Businesses suffered loss as a result of the measures imposed by the government to combat the transmission of Covid-19, which included requiring businesses to close and making Covid-19 a notifiable disease. The respondents brought five test cases on behalf of business interruption policyholders seeking declarations as to the proper interpretation of policies that responded to the presence of Covid-19 “at the premises” of the policyholder. In Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1; [2021] EGLR 12; [2021] AC 649 (a case which concerned clauses which differed from those in the present cases and was concerned exclusively with wording that responded to disease within a radius of the policyholder’s premises), the Supreme Court held that, in order to show that loss from interruption of the insured business was proximately caused by one or more occurrences of illness resulting from Covid-19, it was sufficient to prove that the interruption was a result of government action taken in response to cases of disease which included at least one case of Covid-19 within the geographical area covered by the clause (radius clauses). The present cases raised, among other things, the same question of causation in the relation to “at the premises” clauses. The appellant insurers argued that none of the claims satisfied the “but for” test of causation, since the respondents’ losses would have been suffered even if there had been no occurrence within the radius, because the mandatory closure of businesses would have happened anyway: [2023] EWHC 1481 (Comm). The appellants appealed. The respondents cross-appealed. Held: The appeals and cross-appeals were dismissed. (1) The correct approach was to begin with the interpretation of the policies in issue, having regard to their language and context. The nature of the insured peril in question would inform the nature of the causation test which the parties could be taken to have agreed. All of the disease clauses included, as an element of the insured peril, that there should be an occurrence “at the premises” of a notifiable disease. Although Covid-19 was not listed (and was not even known of) as a notifiable disease at the date of the policies, the existing listed diseases under the relevant legislation were diseases which were capable of spreading rapidly and widely, potentially affecting and causing interruption to businesses over a wide area. The contracting parties intended that cover would be provided for diseases that spread rapidly and widely, and therefore contemplated that the response of the government would be generalised in nature. Accordingly, if the parties had applied their minds to the circumstances in which the insured premises were likely to be closed by a relevant authority, as a result of an occurrence of disease at the premises, they would have contemplated that closures or restrictions imposed by the authority in such cases would be imposed in response to the outbreak as a whole over the relevant area, whether local or national. The parties could not have intended a conventional “but for” approach to causation to apply as it would in general be difficult or impossible for the policyholder to prove that the restrictions would not have been imposed “but for” the occurrence of the disease at the insured premises. It followed that the government’s order or advice to close the business premises was in response to an occurrence of Covid-19 at each of the premises, operating in combination with all other cases of Covid-19 in the country which had occurred: Financial Conduct Authority v Arch Insurance (UK) Ltd applied. (2) On the proper interpretation of clauses which responded to actions of “the Medical Officer of Health for the Public Authority”, as a matter of ordinary language, “public authority” did not distinguish between those acting locally and those acting more remotely or nationally. There was nothing in the policies to suggest a narrower meaning. Notifiable diseases were a category of peril which by reason of their notifiability contemplated contagion or infection in others by wide and rapid spread, in the absence of closure or restriction. That inherently included cases where a national response was readily contemplatable. A more purposive construction of the additional requirement of “medical officer of health advice/approval” to a peril supported the natural meaning of the words. Where the notifiable disease was new, or where the closure or restriction was imposed at a national level because of the extent of spread or potential spread of the disease, such medical knowledge was likely to be lacking at a local level. (3) It was a fundamental tenet of insurance law that cover responded to insured perils and there would be no cover unless the insured peril had been made out. In the present case, the insured perils required the “occurrence” of a notifiable disease. An “occurrence” was something that happened at a particular time, in a particular place, in a particular way. Thus, the presence of a person with Covid-19 at a premises before the disease became notifiable would not be an occurrence of a notifiable disease at the premises and so was not an insured peril under the policies. (4) The specific wording of the policy which referred to the closure or restrictions being placed on the premises “on the advice or with the approval of the medical officer of health of the public authority as a result of a notifiable human disease manifesting itself at the premises” did not introduce a requirement of knowledge of the occurrence of the notifiable disease at the premises by implication. As a matter of construction, the advice or approval related to the closure or restriction. It did not refer to “informed” advice, nor did it otherwise expressly specify any state of knowledge of the medical officer of health. The words “as a result of” provided the connection between the notifiable disease and the closure or restriction on the advice of that officer. Although what was required to show causation was an independent matter from the identification of the insured peril, it followed inexorably from the resolution of the causation issue that the medical officer of health whose advice led to the closure of or imposition of restrictions on the premises did not have to know about the manifestation (or occurrence) of the notifiable disease at those specific premises. In those circumstances, it was impossible to introduce a requirement of knowledge by implication. Gavin Kealey KC and Keir Howie (instructed by Clyde & Co LLP) appeared for the appellants in the first case; Adam Kramer KC and William Day (instructed by Stewarts Law LLP) appeared for the respondents in the first case; Aidan Christie KC and Anna Hoffmann (instructed by Keoghs LLP) appeared for the appellant in the second case; Jeffrey Gruder KC and Mubarak Waseem (instructed by Barings Law of Manchester) appeared for the respondents in the second case; Michael Davie KC and Martyn Naylor (instructed by DAC Beachcroft LLP) appeared for the appellant in the third case; Neil Fawcett (instructed by Gunnercooke LLP) appeared for the respondents in the third case; Keir Howie (instructed by Clyde & Co LLP) appeared for the appellant in the fourth case; Jeffrey Gruder KC and Mubarak Waseem (instructed by Barings Law of Manchester) appeared for the respondents in the fourth case; Aidan Christie KC and Sushma Ananda (instructed by DWF Law LLP) appeared for the appellants in the fifth case; Richard Chapman KC and David Hoffman (instructed by Hugh James) appeared for the respondent in the fifth case. Eileen O’Grady, barrister Click here to read a transcript of London International Exhibition Centre plc v Allianz Insurance plc and others