Property and business interruption

Written by James Adams

Key developments in 2024 

Technip v MedGulf

Technip Saudi Arabia Limited v The Mediterranean & Gulf Insurance and Reinsurance Co. (MedGulf) [2024] EWCA Civ 481 concerned a dispute over coverage for a claim by Technip under its construction all risks policy with MedGulf written on an amended WELCAR wording.  The claim arose from damage to a wellhead platform offshore of Saudi Arabia caused by a tug.  The tug was chartered by Technip, who had contracted with the wellhead's owner, KJO, an unincorporated joint venture. 

In the High Court, Jacobs J held that a claim against MedGulf failed due to the wellhead platform falling within the scope of a policy exclusion for damage to any property which the Principal Assured owns and is not otherwise provided for in the policy.  Principal Insureds was defined in the Policy to include both Technip and KJO's joint venture partners, but Principal Assured was not defined.  On appeal, Technip argued that Principal Assured in the endorsement did not mean the same as Principal Insured, but instead referred only to the insured entity making a claim.  However, the Court of Appeal agreed with Jacobs J and MedGulf that Principal Assured should be read as Principal Insured, having regard to various factors, including that this interpretation did the least "violence" to the language used and best accorded with the apparent commercial rationale of the policy.  Furthermore, although this was a composite policy giving rise to a separate contract with each insured entity, it did not follow that Principal Assured should be construed as referring only to the entity under each contract.  Rather, Principal Assured had the same meaning across all contracts arising from the composite policy.  The appeal was therefore dismissed.

This case provides helpful clarification for policies written on the WELCAR wording.  More generally, it usefully illustrates how the courts can navigate linguistic inconsistencies in policy language. 

COVID-19 business interruption

In 2024, the courts have seen swathe of further litigation involving disputes over coverage under business interruption (BI) insurance policies arising from the COVID-19 pandemic.

The year began with the Court of Appeal's judgment in Various Eateries Trading Ltd v Allianz Insurance Plc [2024] EWCA Civ 10 which concerned aggregation of losses under a clause providing cover for "enforced closure" due to COVID-19.    For the purpose of applying the relevant limit, the policy provided losses "that arise from, are attributable to or are in connection with a single occurrence" were to be aggregated.  The Court of Appeal upheld the High Court's decision which allowed for aggregation of losses by reference to government measures, but not by reference to the initial outbreaks in Wuhan or the UK, which were found to be too remote.

The year began with the Court of Appeal's judgment in Various Eateries Trading Ltd v Allianz Insurance Plc [2024] EWCA Civ 10 which concerned aggregation of losses under a clause providing cover for "enforced closure" due to COVID-19.    For the purpose of applying the relevant limit, the policy provided losses "that arise from, are attributable to or are in connection with a single occurrence" were to be aggregated.  The Court of Appeal upheld the High Court's decision which allowed for aggregation of losses by reference to government measures, but not by reference to the initial outbreaks in Wuhan or the UK, which were found to be too remote.

In Gatwick Investment Ltd v Liberty Mutual Insurance [2024] EWHC 124 (Comm), the High Court judgment of Jacobs J addressed a number of preliminary issues arising in COVID-19 BI claims under prevention of access clauses.  As with LIEC v Allianz, this trial involved a number of claims managed together.  The issues are too numerous to detail here, but notably include a finding that a prevention of access clause requiring “action by the Police or any other Statutory Authority” was triggered by UK lockdowns and other restrictions, and that COVID-19 constituted a "danger" within a 1 mile radius of insured premises.  The judgment also addressed whether limits could be claimed per premises, per insured or on an aggregate basis, with different conclusions reached on the differing policy wordings considered as part of the trial.  The insureds also unsuccessfully sought to challenge the finding of the High Court in Stonegate that furlough payments to the insured should be credited as a saving on employment costs. 

In Bellini v Brit and Others [2024] EWCA 435, the Insured sought to claim under an extension to BI cover headed "Murder, suicide or disease", which provided that the insured would be indemnified for "interruption of or interference with the business caused by damage".  Damage was defined in the policy as meaning "physical loss, physical damage and physical destruction".  COVID-19 had not caused damage, so the Insured argued that a requirement for damage made cover under the clause illusory and its inclusion was therefore a mistake.

The Court of Appeal did not consider that something had obviously gone wrong with the language of the clause and, although the scope of cover was reduced by the requirement for damage, it did not render it illusory.  The insured sought to rely on repetitive and inconsistent elements of the drafting of the policy in support of its construction of the policy.  However, the Court of Appeal rejected those arguments, attributing such repetition and inconsistency to the "pick and mix" approach taken to the insertion of clauses into the policy.  In conclusion, the Court was in no doubt that that reasonable reader would have concluded at the policy’s inception the clause only provided damage-based cover.

One of the claims dealt with in the preliminary issues trial in Gatwick was International Entertainment Holdings (IEH) & Others v Allianz Insurance PLC [2024] EWHC 124 (Comm). The parties appealed on various issues which were dealt with at a separate hearing before the Court of Appeal. This claim involved a clause which provided cover in the event of a denial of access by a policing authority in response to an incident likely to endanger human life within a one-mile radius of the premises (the NDDA Clause).  

Interestingly, the Court of Appeal adopted from Bellini v Brit the characterisation of the drafting as "pick and mix" and agreed that this weighed heavily against arguments for construing terms used throughout the policy according to a consistent meaning.  On that basis, the Court of Appeal disagreed with Jacobs J's conclusion that COVID-19 did not amount to an "incident".  However, it rejected the appeal against his finding that the Government was not a "policing authority" within the meaning of the clause. The Court of Appeal therefore upheld the conclusion that the NDDA Clause did not provide cover for IEH's losses.

In view of the above, issues as to the application of limits were moot points, but the judgment addresses them nonetheless. One issue was whether the "any one claim in the aggregate during any one Period of Insurance" limit should be construed with an "and" before "aggregate" or whether the words from "aggregate" onwards should be disregarded.  Something had clearly gone wrong with the wording, but it was not clear which of the two competing constructions should be preferred, so insurers' construction was rejected.

COVID-19 has also raised difficult issues under contracts of reinsurance.  In UnipolSai Assicurazioni SpA v Covéa Insurance Plc [2024] EWCA Civ 1110, the Court of Appeal confirmed that the onset of the pandemic in March 2020 was a "catastrophe" for the purpose of Covéa's excess of loss reinsurance held with Unipol.  Unipol's challenge to an arbitral award which found that cover was triggered under the reinsurance therefore failed.

What to look out for in 2025 

COVID-19 business interruption

Litigation over coverage issues arising in COVID-19 BI claims looks set to continue into next year, with the Court of Appeal due to hear an appeal from the above-mentioned High Court judgment in the Gatwick v Liberty Mutual in January 2025.  The appeal is expected to address issues including the application of limits and the crediting of furlough payments.

Impact of climate change on property damage risks

In July, the Royal Meteorological Society published its annual State of the UK Climate report.  Some may cheer the report's observation that the number of "pleasant" days (meaning a daily maximum 20°C) has increased by 41% when comparing the most recent decade with 1961-1990.  Unfortunately, this is accompanied by an increased risk of potentially destructive extreme weather events. 

The report records that 2023 was the second warmest year, June was the warmest June and September was the equal-warmest September on record in the UK.  2023 was also the UK's seventh wettest recorded year.  Although causes of particular weather events are multifactorial, the report is quite clear that these extremes have been made more likely by climate change.  There is a clear trend towards warmer and wetter weather in the UK.  This makes weather events such as the floods caused by Storm Bert and Storm Conall all the more likely.  It also increases the risk of extended periods of hot and dry weather, like that of summer 2022 which resulted in a significant surge in subsidence damage to buildings. 

Explore Annual Insurance Review 2025