The Supreme Court has recently given its decision in the FCA's business interruption Test Case. As explained in our article last week, the result is overwhelmingly in favour of policyholders. 

The practical consequences of the decision where the policy provides cover for Notifiable/Infectious Disease within a specified radius of the insured premises have been well-documented. The focus for those policyholders ought now to be on quantum and claims settlement. In summary, it is sufficient for a policyholder to prove that the interruption was a result of cases of disease which included at least one case of COVID-19 within the geographical area covered by the clause. If the policyholder can meet this threshold, the policy should respond to cover losses resulting from the localised occurrence of the disease in combination with the wider pandemic (subject to any express exclusions).

But there is another closely–related category of policy wordings which have been the subject of less focus: those that provide cover for Notifiable Disease 'at the insured premises'. Although some of the wordings considered in the Test Case did provide cover for Notifiable Diseases at or within a specified radius of the premises, the focus has been on the latter. The Test Case did not therefore make any direct ruling in relation to Notifiable Disease clauses that respond to losses caused by occurrences of disease ‘at the insured premises’.

Prior to the Supreme Court judgment being released, we were seeing insurers largely reject claims for business interruption arising from COVID-19 where the wording required the Notifiable Disease to occur at the premises or a closure imposed by a local / government authority to result from the occurrence of the Notifiable Disease at the premises.

The insurers' arguments were generally two-fold: (i) that the insured must evidence the presence of COVID-19 at the premises; and (ii) the closure must specifically be as a consequence of an occurrence of COVID-19 at the premises and any BI cover would be limited to BI caused by that occurrence. In other words, the impact of the wider pandemic would not be covered meaning that in practice the cover for most policyholders would largely be illusory. 

On (i) the Supreme Court has made some helpful findings as to how policyholders can evidence the presence of COVID-19 (whether that be at the premises or within a specified radius of it). 

On (ii) the insurers' arguments need to be revisited in light of the Supreme Court's findings. A wording which provides cover for Notifiable Diseases 'at the premises' is largely akin to a wording which provides cover for Notifiable Diseases within a specified radius of the premises. Both specify a geographical area covered by the clause: the material difference being that the area in the former is smaller than the latter – effectively within the boundaries of the insured premises. 

Provided that the policyholder can demonstrate the presence of COVID-19 within that boundary (and the wording will dictate exactly what is required here), there is no reason in principle why the cover should not respond to losses resulting from the localised occurrence within the insured premises in combination with the impact of the pandemic more generally.

The findings of the Supreme Court means that policyholders with 'at the premises' wordings who may previously have had their claims rejected by insurers should therefore be revisiting those coverage decisions.