Opinion
The implications of England’s business interruption ruling
A
s readers now know, the test case brought by the Financial Conduct Authority in the English High Court challenging the declinature of many Covid-19 claims under Business Interruption Policies in England was largely successful. Many of the insurers appealed by way of a ‘leapfrog’ provision allowing them to appeal directly to the English Supreme Court without going through the Court of Appeal first. The Supreme Court unanimously dismissed the insurers’ appeals (The Financial Conduct Authority v Arch Insurance (UK) Limited and others [2021] UKSC 1). This is the end of the road for the insurers. According to public reports, the insurers must now pay out claims totalling approximately £1.8 billion. The insurers’ declinatures all related to claims under extensions in English business interruption policies. Most of 26
March 2021
these extensions differ from those commonly found in New Zealand business interruption policies and so the decision is of little help in this regard. However, while determining the correct interpretation of the English extensions, the Supreme Court had to determine a causation argument that arises in all business interruption policies where multiple causes of an insured peril act in combination to bring a business interruption that might not otherwise arise. The Supreme Court also had to address the correct application of the trend clause found in all Business Interruption Policies. We address in this article the causation argument and the trend clause argument. The relevant background facts are that the insurers’ extensions provided cover for the interruption to their policyholders’ business in consequence of
people suffering from Covid-19 within a defined vicinity of the business, which in most cases was a radius of 25 miles. Causation argument The insurers argued that for there to be a valid claim it is necessary to show that the policyholder’s loss of profit would not have occurred but for the occurrence of the insured peril under the extension (people suffering from Covid-19 within a 25 mile radius). They said that because of the widespread nature of the pandemic across the country, policyholders suffered the same or similar interruption to their businesses that they would have suffered if the insured peril had only occurred locally. This meant the policy did not respond because the insured peril occurring locally did not cause their loss. The Supreme Court rejected
