In February 2022, the Commercial Court held that a denial of access (non-damage) (NDDA) clause within a business interruption insurance policy: (i) did provide cover for losses as a result of access to premises being restricted (in this case as a result of various COVID lockdowns), and (ii) that the policy in question could be analysed as a composite policy, with each insured entity having a separate insurable interest, represented by the venue it owned. Each insured could therefore claim the limit of indemnity in respect of each of its premises, rather than all of those premises in the aggregate, increasing the indemnity available.
The case concerned the scope of cover provided by a Business Combined Insurance policy issued by AXA Insurance UK Plc (AXA) for the 2019/2020 policy year (the Policy).
The policy was held by various entities in the Corbin and King group (Corbin & King), as owners and operators of eight well-known restaurants and cafés in and around London (including The Wolseley and The Delaunay).
Following the lockdowns imposed by the UK government in response to the COVID-19 pandemic, Corbin & King suffered business interruption losses – and sought indemnification of those losses under the terms of the Policy.
The NDDA clause in the Policy provided cover for business interruption losses where
“access to your premises is restricted or hindered ... arising directly from:
- the actions taken by the police or any other statutory body in response to a danger or disturbance at your premises or within a 1 mile radius of your premises.
- the unlawful occupation of your premises by third parties…”
In the "Cover limits" in the business interruption section of the Policy, the "sums insured/limits" for NDDA claims is stated to be "100% of the sum insured or £250,000 whichever is less".
This case concerned two key issues:
- Whether the NDDA clause provided effective cover for loss resulting from restrictions on access to Corbin's premises under government regulations passed in response to the COVID-19 pandemic in the course of 2020 (the Coverage Issue) and;
- Whether, if the NDDA clause did provide cover, there was a single limit of £250,000 in respect of all premises for any one claim, or whether there was a limit of £250,000 for each set of premises (the Quantum Issue).
On the Coverage Issue, Corbin & King argued that they were entitled to an indemnity under the NDDA clause, on the basis that there were (i) cases or the threat of cases of COVID-19 within a one mile radius of each of the Corbin & King premises, and (ii) that such cases or threatened cases, combined with actual or threatened cases elsewhere in the UK, were the effective cause of the passing of the Regulations which led to the restriction of access to each of the Corbin & King premises (in line with the reasoning of the Supreme Court in the Financial Conduct Authority's business interruption insurance test case (FCA Test Case)).
AXA argued that the relevant NDDA clause was intended to cover transient, localised dangerous incidents or disturbances in response to which action is taken at a local level to prevent access to Corbin & King's premises as opposed to a nationwide state of affairs.
On the Quantum Issue, AXA accepted that if Corbin & King succeeded on the Coverage Issue, they would (subject to proof of loss) be entitled to an indemnity of up to £250.000 in respect of each of the three restrictions (i.e. £750,000). Corbin & King argued that they were entitled to an indemnity for each of the three instances where access was restricted for each of their premises, i.e. up to £750,000 for each of their premises (rather than £750,000 in total).
The case was heard by Cockerill J.
On the Coverage Issue, she held that the broader approach to causation taken by the Supreme Court should be adopted and therefore, that “…COVID-19 is capable of being a danger within one mile of the insured premises, which, coupled with other uninsured but not excluded dangers outside, led to the regulations which caused the closure of the businesses and caused the business interruption loss.”
On the Quantum Issue, Cockerill J noted that [“i) The Policy refers to cover in respect of “interruption and interference with the business where access to your Premises is restricted …” and "ii) The premises were in different locations and could well be differently affected by a danger triggering cover”.
It was held that each policyholder was a company with a separate interest represented by the restaurant / café which it owns. The policy therefore was to be analysed as a composite, not joint, insurance policy (i.e. a single policy which insures the interests of a number of different insureds, which takes effect legally as a series of separate contracts of insurance between AXA and the individual insureds).
As a result, in cases where the coverage clause was triggered, these should be seen as separate incidents. It was therefore held that the £250,000 limit of liability therefore applied for individual policyholders in respect of each of its premises for each set of restrictions (leading to a total indemnity of c. £4.4m).
This decision provides further guidance on aggregation of claims and how to apply the Supreme Court's reasoning regarding causation in respect of NDDA clauses in the FCA Test Case. In particular it may have a significant impact on claims quantum for some policyholders.
It is therefore of particular interest to policyholders who have suffered business interruption losses in the context of the COVID-19 pandemic, in particular those seeking to make a claim on the basis of an NDDA clause and/or those with multiple insureds / premises.
We understand that while permission was granted, AXA have elected not to pursue an appeal. Any policyholders who might be affected by this decision would be advised to monitor the position with other similar cases currently going through the Courts concerning business interruption loss aggregation issues, including Greggs PLC v Zurich Insurance PLC, Various Eateries Trading Ltd v Allianz and Stonegate v MS Amlin & Ors.