High Court backs policyholders in latest business interruption test case

Stewarts, Clyde & Co and DWF among firms acting in litigation that sees Commercial Court rule against insurers on ‘at the premises’ business interruption test case
Outside The Rolls Building in London

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The High Court has backed policyholders in the latest pandemic-era litigation, brought by the London International Exhibition Centre (ExCel) and Pizza Express as lead claimants among six expedited test cases. 

The litigation, in which Stewarts acted for ExCel, was against a group of thirteen insurers represented by DAC Beachcroft, Clyde & Co, Keoghs and DWF, among others, with Barings Law, Hugh James, Dechert and gunnercooke acting for other claimants whose claims were heard together.    

This was one of the latest rounds of test case litigation following the UK Supreme Court’s 2021 judgement on disease clauses in insurance policies brought by the Financial Conduct Authority (FCA)

The FCA Test Case focused on ‘radius’ policies covering business interruption losses caused by disease within a certain radius of the insured premises, while this litigation concerned ‘at the premises’ (ATP) business interruption insurance, which covers losses arising from an insured’s premises, which were not discussed within that earlier case law.  

The court rejected alternative causation arguments pursued by the 13 insurers involved, who had argued that ATP clauses were qualitatively different from radius clauses, and thereafter ran two main arguments on the appropriate test of causation to be applied here. 

One was a traditional ‘but for’ test of causation, and the other, propounded by the following market in the ExCel litigation, argued for a novel causation test described as “direct, distinct, palpable or discernible” causation in ATP cases. 

The trial judge, Mr Justice Jacobs, held that the same principles of causation established in the FCA Test Case also applied to ATP insurance clauses, saying “a large proportion of outstanding BI insurance claims from the pandemic may be concerned with [such] cover” and that “no previous case in England and Wales has directly addressed this issue”.  

He also noted insurers had settled several ATP claims brought by policyholders after the FCA Test Case, and, in assessing the legal arguments, found the Supreme Court’s analysis “applies on the causation argument, and that none of the insurers’ arguments in support of the contrary conclusion is persuasive”. 

He added: “This seems to me to be an appropriate result, since any other conclusion would give rise to anomalies which it would be difficult rationally to explain to a reasonable [small or medium-sized business] policyholder who read the policy.”  

Aaron Le Marquer, head of policyholder disputes at Stewarts, led the litigation with James Breese. Le Marquer said: “The court’s ruling provides some further finality, subject to any appeals, for issues left unresolved by the FCA test case and is, therefore, a helpful development for the insurance market and businesses across the UK.” 

Becky Rogers, head of property claims at Allianz Commercial, said the company would need to consider its position given the judgement, adding that it would work through “how it is likely to impact those of our policyholders who have outstanding Covid-19 business interruption claims under disease at the premises clauses”.  

A further appeal is possible, most likely to the Court of Appeal first, unlike the FCA Test Case, which went straight up to the UK Supreme Court.   

The litigation saw 22 barristers insructed, including 10 silks, many of them senior. Stewarts instructed 3 Verulam Buildings, while counsel from 7 King’s Bench Walk, 4 Pump Court, 4 New Square, Essex Court and 18 St. John Street in Manchester were instructed by defendants and supporting claimants in the litigation. 

DAC Beachcroft’s Ian Plumley acted for insurers in the Pizza Express proceedings and partner Tom Watkinson for AXA in Mayfair, while Clyde & Co’s Mark Wing was the lead partner for the defendants Allianz, CNA Insurance, Aviva, Zurich and Chubb. Viran Ram, also of Clyde & Co, was the lead partner for another insurer in the Kaizen Cuisine element. Other firms declined to comment.

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