1). Disease Clauses
The disease clauses considered by the Court were in policies underwritten by each of RSA, Argenta, MS Amlin and QBE. The Court was primarily concerned with the questions of whether the clauses responded to the effects of a pandemic, whether the clauses responded to occurrences of the disease within the vicinity of insured premises or within a prescribed radius and, if the latter, was the cover only intended for local disease outbreak, rather than national.
All, bar two, of the disease clauses were found to provide cover to the insured for interruption or interference with the business, as a result of the occurrence of COVID-19 within the relevant vicinity of the insured premises.
Occurrence and Causation
When considering the requirements of an “occurrence” the Court found that this was satisfied when one individual within the relevant radius of the insured premises was infected with COVID-19. The Court stated that “We do not consider that it is necessary for there to have been an “occurrence” of the disease that the case should have been diagnosed” .
On the question of causation, the Court found that “the test can be regarded as satisfied on the basis that the occurrence of the disease within the area was a part of an indivisible cause, constituted by COVID-19. Or alternatively, that each of the cases of the disease was an independent cause, and they were all equally effective in producing the government response” .
The Insured Peril
The insured peril under the disease clauses was found by the Court to be “composite”, as it comprised a number of linked elements – interruption or interference to the insured business, following the occurrence of COVID-19 within the stated radius of the insured premises. The result of this is that it is not necessary to prove that the interruption or interference to the business is proximately caused by the occurrence of COVID-19.
Vicinity and Radius
On the question of the occurrence of a notifiable disease within the specified radius of an insured premises, the Court found that cover was not limited to the effects of outbreaks within that area alone. Cover was found to be for notifiable disease which had come within the vicinity of the insured’s premises, rather than being only for isolated/discrete local occurrences. The Court reasoned this finding as being because notifiable diseases include those which are capable of widespread and rapid dissemination, which will require territorially far-reaching responses.
2). Prevention of Access Clauses
The Prevention of Access clauses considered by the Court were in policies underwritten by each of Arch, Ecclesiastical, Hiscox, MS Amlin, RSA and Zurich. Certain of the wordings were found to provide cover for loss arising from prevention/denial/hindrance of access to insured premises due to the actions of a government/local authority body due to an emergency or incident within a specified area.
The Court considered the operative parts of the Prevention of Access clauses and their related meanings.
Vicinity and Radius
The Court somewhat departed from the findings under the disease clauses in respect of vicinity and radius and found that cover was only available where something specific had happened at a specific time in a specific area. It followed that there was only limited localised cover for the insured businesses, where the actions of the relevant authority were in response to a localised occurrence of COVID-19.
The advices of the Government on 16, 20 and 23 March 2020 were deemed to be “advice” by the Court and fell short of being an “order” or mandatory instruction. Only an action with legal backing could prevent access fully. In that context, only the 21 and 26 March 2020 Regulations issued by the Government were capable of cover.
The capacity and standing of the intervening authority was considered by the Court, which found that a “competent local authority” would include government, as well as localised authority with the requisite level of competence.
The position under Prevention of Access clauses is more nuanced than under the Disease clause claims, and a close inspection of the precise terms of the policy in question will be required, together with an examination of the impact on the insured business under the Government’s regulations of 21 and 26 March 2020.
3). Hybrid Clauses
The Hybrid clauses were in policies underwritten by Hiscox and RSA and are, as the name suggests, a hybrid of disease clause wordings and prevention of access clause wordings. Similarly, to disease clause wordings, the Court did not find that cover was only available in the instance of losses arising from the local occurrences of COVID-19. However, the Court followed the reasoning employed in respect of the prevention of access clauses and applied the “restrictions” imposed by an authority in a strict fashion, such that only mandatory directions to cease business would trigger cover under the policies.
As with the prevention of access clauses, a rigorous examination of the terms of the policy and the impact on the insured’s business will be required before policy coverage can be determined.