As we have recently reported, the clear trend in the United States Courts is towards finding that the typical Business Interruption (BI) coverages in U.S. commercial property policies will not be triggered by the COVID-19 pandemic. Thus far, the majority of the decisions on this coverage issue have gone in favor of the insurance industry.
Interestingly, on Tuesday, September 15, 2020, the High Court of Justice for the Business and Property Courts in Great Britain issued a ruling in a “test case” relating to 370,000 British BI claims. In a lengthy opinion authored by Lord Justice Flaux (pictured below in the traditional attire of the Queen’s Bench), the High Court found that the policy forms at issue extended BI coverage for losses related to the COVID-19 pandemic.
Fortunately, this ruling from across the pond is unlikely to have much impact on the ongoing litigation of this dispute in the U.S. That is because the policy forms that the industry presented to the High Court in the “test case” included a coverage for losses related to the spread of infectious disease. Lord Flaux found that most – though not all – of the policy forms would provide coverage. Because it was a “test case” there was not any specific finding of coverage for any individual insured. Rather, the decision provides the manner in which insureds should present their claims depending on the forms or combination of forms in each policy.
Perhaps the most interesting aspect of this ruling is the contrast in how the U.S. and U.K. markets reacted to the early 2010’s SARS outbreak. In the more risk-averse U.S. market, the industry response to SARS was to quickly adopt virus exclusions. In the handful of rulings on COVID-19-related BI coverage that we have seen to date, it appears that the courts in the U.S. will enforce that exclusion.
In the U.K., the market responded to SARS by offering infectious disease coverage. The insurers offering that coverage have obviously had a decade to collect the premiums that go with it. However, according to the ruling of the High Court, it appears that those insurers will now be required to pay the claims of a broad cross-section of British businesses. Only time will tell which market had the better strategy for dealing with coverage issues associated with the current global pandemic.
As always, if you would like to discuss the issues in this newsletter or any other matter, please feel free to contact Lether Law Group at any time.