London International Exhibition Centre PLC v Allianz Insurance PLC & Ors

Factual and Procedural Background

This opinion concerns appeals from a decision of Judge Jacobs on preliminary issues in six expedited test cases involving claims for business interruption (BI) losses due to Covid-19. The claims arise from insurance policies providing cover for disease occurring or manifesting 'at the premises' of policyholders. The lead case involved a large exhibition venue in The City, referred to as the Exhibition Centre. Other claimants are small or medium-sized businesses such as a hairdresser, gyms, a nightclub, restaurants, a café, and a bar/nightclub, each operating from a single premises.

The policies differ in wording but share coverage for BI losses caused by closure or restrictions ordered due to the occurrence of notifiable diseases at the insured premises. The insurers challenge the causal link between the occurrence of Covid-19 at the premises and the losses due to closure imposed by government action.

The preliminary issues were tried on agreed and assumed facts concerning the spread of Covid-19 in the UK, government responses including lockdowns and business closures in March 2020, and the presence of Covid-19 cases at the insured premises prior to closure. The factual background aligns closely with that considered by the Supreme Court in Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1.

Legal Issues Presented

1. What are the causation requirements for 'at the premises' disease/hybrid cover in each appeal on the correct construction of each policy, specifically whether it is sufficient to prove that government measures were made or continued in response to cases of Covid-19 including at least one case at the insured premises?
2. Whether it is necessary to prove that the occurrence or manifestation of Covid-19 at the insured premises was a distinct effective cause of the government measure closing or restricting the premises?
3. Whether it is necessary to prove that the occurrence or manifestation of disease at the premises was a 'but for' cause or a necessary and/or sufficient cause of the government measure?
4. Whether it is necessary to prove that the occurrence or manifestation of disease at the premises was reported to or otherwise known by the authority prior to the closure or restrictions?
5. Whether it is necessary to prove that the occurrence of Covid-19 at the premises was something the government had information about and took into account prior to government action?
6. Additional issues relating to the timing of notifiability of disease, the proper construction of "Medical Officer of Health for the Public Authority," and the meaning of "suffered by any visitor or employee" in specific policies.

Arguments of the Parties

Insurers' Arguments

• Exhibition Centre Insurers: The judge should have interpreted the policies independently of the Supreme Court's radius clause decision, considering the language and commercial intentions. They argue for a causation test requiring that the occurrence of disease at the premises be a distinct effective cause of closure, meaning the government or authority must have been responding specifically to disease at that premises.
• They stress avoiding hindsight and emphasize the unprecedented nature of the lockdown measures.
• They contend that radius and 'at the premises' clauses differ materially, with 'at the premises' clauses focusing on localised occurrences requiring a direct causal link, while radius clauses contemplate wide-area outbreaks.
• Hairlab and Why Not Insurers: Argue for a 'but for' or necessary and sufficient causation test, requiring a direct causal link between disease occurrence at the premises and government restrictions, including knowledge by the authority of the disease at the premises.
• Mayfair Insurers: Accept that disease suffered at the premises need only be a cause of the closure decision but submit that the authority must have known and taken into account the presence of disease at the premises. They argue the government was responding to reported cases generally and not to specific premises.
• They also rely on the specific wording of their policy requiring disease to be suffered by visitors or employees.
• On the Medical Officer of Health issue, insurers argue the term refers only to local authority officers exercising former medical officer of health functions, not national officials.
• On knowledge, insurers contend that the Medical Officer of Health must have contemporaneous knowledge of disease manifestation at the premises to give advice or approval for closure.

Policyholders' Arguments

• Support the judge's application of the Supreme Court's reasoning in FCA v Arch to 'at the premises' clauses, submitting the causal link required is the same: it is sufficient that government action was taken in response to cases of Covid-19 including at least one case at the insured premises.
• They argue that the nature of highly infectious notifiable diseases implies government responses are to outbreaks as a whole, not to individual premises specifically.
• They submit that the occurrence of disease need not have been diagnosed or reported for cover to arise, consistent with the Supreme Court's findings.
• On the Medical Officer of Health issue, policyholders submit the term should be given its natural meaning, encompassing national as well as local authorities, including Chief Medical Officers and deputies advising government.
• They argue knowledge or reporting requirements on the Medical Officer of Health are not supported by the policy wording or causation analysis.
• Regarding the Mayfair clause wording 'suffered by any visitor or employee,' they submit this does not materially affect the causation analysis and that the judge's interpretation is commercially sensible.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the Supreme Court's decision in FCA v Arch, which established that for radius clauses, each individual case of Covid-19 within the radius was a concurrent and equally effective cause of government-imposed business restrictions. The court accepted that the reasoning in FCA v Arch applies equally to 'at the premises' clauses, despite differences in wording and scope.

The court emphasized that the nature of the insured peril (notifiable infectious disease) informs the causation test. Given the widespread and rapid transmissibility of such diseases, government closures are a response to the outbreak as a whole rather than to discrete occurrences at individual premises. Therefore, a strict 'but for' or 'distinct cause' test is inappropriate and inconsistent with the parties' intentions.

The judge's reasoning was that it would be anomalous and commercially unreasonable for a policyholder to be denied cover simply because the government did not specifically act in response to disease at that premises alone, when the government response was to all cases collectively.

On the issue of knowledge and reporting, the court found no basis in the policy wording to require that the Medical Officer of Health or government authorities must have known of the disease occurrence at the premises before ordering closures. The causation requirement relates to the closure or restriction on the advice or approval of the Medical Officer of Health, not to their knowledge of each specific case.

The court also analyzed the historical and statutory context of the term 'Medical Officer of Health' and 'Public Authority', concluding that these terms encompass both local and national authorities, including Chief Medical Officers and their deputies, rather than being confined to obsolete local authority roles.

Regarding the timing of notifiability, the court held that occurrences of Covid-19 prior to it becoming a notifiable disease do not satisfy the insured peril, as the disease must be notifiable at the time of occurrence at the premises.

The court rejected insurer arguments that the Mayfair policy's requirement that disease be 'suffered by any visitor or employee' imposes a stricter causation test, agreeing with the judge that this wording does not materially alter the causation analysis and is commercially sensible.

Holding and Implications

The court DISMISSED all appeals and cross-appeals.

The holding confirms that for 'at the premises' disease or hybrid clauses, it is sufficient for policyholders to prove that government closure or restrictions were imposed in response to Covid-19 cases which included at least one case at the insured premises. The causation test does not require proof that the occurrence at the premises was a distinct or 'but for' cause, nor that the authorities had knowledge of disease at that specific premises.

This decision aligns the causation test for 'at the premises' clauses with that established by the Supreme Court for radius clauses, providing consistency in interpretation of Covid-19 BI insurance claims. The ruling clarifies the scope of 'Medical Officer of Health' and 'Public Authority' in these contexts, encompassing national as well as local bodies.

No new precedent beyond the application of existing principles was established; the decision primarily applies the Supreme Court's reasoning to a different policy wording context, offering clarity for future Covid-19 related BI claims under similar policies.