Reinsurers scrutinise latest UK pro-policyholder ruling ahead of Covid BI arbitrations

More than four years after the Covid-19 pandemic began, a UK appeals court has held in favour of a policyholder in a case likely to have wider implications for other insureds and for some of the outstanding reinsurance business interruption disputes that are set for arbitration.

An English appeals court on Friday handed London's ExCeL centre and other policyholders victory in a long-running Covid-19 test case, finding that the national pandemic lockdowns triggered the "at the premises” (ATP) clauses in their policies.

The Court of Appeal ruled last week that the UK lockdowns – imposed by the government and designed to control the spread of the coronavirus – triggered specific policy clauses which typically pay out only in the event of an outbreak of disease at the premises.

Insurers including Allianz, Aviva, Chubb and Zurich had called on the court to find that a previous commercial court ruling was wrong to decide that the closure of business premises in the UK was covered by the clauses.

The lower court judgment, handed down by Justice Jacobs in June 2023, found that the Supreme Court's 2021 ruling on disease clauses – a test case brought by the Financial Conduct Authority – also applied to ATP cover.

And now the Court of Appeal has endorsed the High Court's reasoning, finding that the occurrence of Covid-19 at the premises was a concurrent "proximate" cause of the closures of all businesses across the country during the national lockdown.

"On the assumption that there were occurrences of Covid-19 at each of the policyholders' premises, each of those occurrences together with all other cases of Covid-19 in the country were a cause of the closure of those premises," Justices Stephen Males, Andrew Popplewell and Geraldine Andrews wrote in a joint ruling.

The ruling formed part of a wider test case led by the £16mn ($20.3mn) business interruption claim brought by London International Exhibition Centre plc– the owner of London’s ExCeL arena – against the UK arms of Allianz, Aviva, Chubb, CNA, RSA and Zurich.

Insurers sought to dismiss ExCeL’s claim, arguing that the policy coverage had not been triggered by Covid-19. They further argued that the ExCeL had not actually closed during the pandemic lockdowns as it was repurposed as a "Nightingale" hospital to provide the NHS with additional beds in London.

Legal sources described the ruling as an “important victory” for policyholders, with the Court of Appeal providing “much-needed clarity” on insurers’ liability under ATP policies.

A number of Covid business interruption arbitrations are pending between reinsurers and cedants following a failure to settle/agree terms.