International Entertainment Holdings Ltd & Ors v Allianz Insurance Plc

Factual and Procedural Background

The appeals concern the interpretation of a 'Non-Damage Denial of Access' (NDDA) clause in an insurance policy providing business interruption cover. The claims arose following the closure of entertainment venues and other public gathering places by Regulations made by the Secretary of State for Health and Social Care under the Public Health (Control of Disease) Act 1984 in response to the Covid-19 pandemic.

The policyholders brought claims under a clause that extended cover to losses resulting from interruption or interference with business caused by an incident likely to endanger human life or property within a one-mile radius of the insured premises, where access was prevented or hindered by a policing authority, subject to certain limits including a maximum indemnity period of three months and a liability cap of £500,000 per claim.

The issues were initially tried as preliminary issues by Mr Justice Jacobs alongside other cases involving various NDDA clauses. The present appeals raise distinct issues affecting only the parties involved.

The judge answered key issues relating to the interpretation of the clause, including whether a case of Covid-19 alone constitutes an 'incident', the geographic scope of the incident, the meaning of 'policing authority', and the application of the policy limits.

The judge concluded that the Secretary of State was not a 'policing authority' within the meaning of the clause, which was dispositive of the claims. The policyholders appealed this conclusion along with other issues, and the insurers cross-appealed on limit-related issues.

The policyholders are a holding company and subsidiaries engaged in the ownership and operation of theatres, cinemas, concert halls, restaurants, and related businesses. The insurance cover was provided by Company A under a composite 'Commercial Select' policy for the period 30 April 2019 to 30 April 2020.

The claimants complied with the Covid-19 Regulations requiring closure of their premises, which caused business interruption losses exceeding the policy’s maximum indemnity period. The policy contained a Disease clause excluding Covid-19, so claims depended on the NDDA clause.

Legal Issues Presented

1. Does the presence of a case of Covid-19 amount, without more, to an 'incident likely to endanger human life' within the meaning of the clause?
2. If so, must the case of Covid-19 (the 'incident') occur within the one-mile radius or can it occur outside the radius provided it endangers life or property within the radius?
3. What is the meaning of the words 'by any policing authority'?
4. Does the £500,000 limit apply separately to each insured premises or to each insured claimant?
5. Is there an aggregate limit of £500,000 in any event?

Arguments of the Parties

Appellant's Arguments (Policyholders)

• The term 'any policing authority' should be interpreted broadly to include any body with authority to prevent or restrict access to premises, not limited to the police or similar law enforcement bodies, but including central government acting to protect public safety.
• The presence of a case of Covid-19 should be regarded as an 'incident' as a neutral term synonymous with 'occurrence' or 'event' and does not require the event to be apparent or manifest to others at the time.
• The incident need not occur within the one-mile radius so long as human life or property within the radius is endangered.

Appellee's Arguments (Insurers)

• The term 'policing authority' refers to the police or similar bodies whose function is to ensure law enforcement and does not extend to central government or ministers enacting legislation.
• The word 'incident' connotes something more than a mere occurrence; it must be an event likely to endanger life or property and be manifest or apparent rather than unobservable.
• The incident must occur within the one-mile radius to give effect to the specified geographic limitation in the clause.
• The £500,000 limit applies separately to each insured premises rather than to each insured claimant.
• The phrase 'any one claim in the aggregate' contains a drafting error; however, the court should not correct it by adding words as the intended meaning is unclear.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook an objective interpretation of the NDDA clause, considering what a reasonable policyholder would understand. It emphasized that the clause extends cover to losses caused by incidents likely to endanger life or property within a one-mile radius, but only when access is prevented or hindered by a policing authority.

Regarding the meaning of 'policing authority', the court rejected the policyholders’ broad interpretation including central government, holding that a reasonable policyholder would understand the term to refer to the police or similar bodies whose primary function is law enforcement, not government ministers enacting legislation. This was dispositive for dismissing the claims.

On whether a Covid-19 case alone constitutes an 'incident', the court agreed with the judge that while a case is likely to endanger life, an 'incident' connotes a happening apparent or manifest to others at the time, not merely an unperceived event. The court noted that the word 'incident' generally implies something more than a neutral occurrence and must call for a policing authority’s response.

Concerning the geographic scope, the court agreed with the judge that the incident must occur within the specified one-mile radius for the clause to apply, as this interpretation provides certainty and straightforward application consistent with the policy wording.

The court held that the £500,000 limit applies separately to each insured premises, as each closure caused by a distinct incident within the radius constitutes a separate claim. This interpretation avoids capricious distinctions and aligns with the policy’s structure.

Finally, the court rejected the insurer’s proposed correction of the ambiguous phrase 'any one claim in the aggregate' by adding the word 'and', finding no clear mistake on the face of the policy and noting that the intended meaning was uncertain. The court applied established principles restricting correction of contractual language absent clear evidence.

Holding and Implications

DISMISSED: The appeals were dismissed on the basis that the Secretary of State for Health and Social Care is not a 'policing authority' within the meaning of the NDDA clause. Consequently, the policyholders’ claims under this clause fail.

The court’s decision directly affects the parties by upholding the dismissal of the claims. No broader precedent was established beyond the interpretation of the NDDA clause in the context of these facts and this specific policy wording.