Speed Read
The Commercial Court has issued another key judgment concerning business interruption losses arising from Covid-19. The judgment delivered by McDonald J dealt with policy extensions that contain 'at the premises' wording, holding that:
- based on the wording of the policy, the policyholder was not entitled to be indemnified; and
- to trigger cover for business interruption losses, the policyholder would need evidence of a diagnosed or at least a symptomatic case of a notifiable disease (i.e. Covid-19) at the premises or the detection of the causative pathogen at the premises.
From an insurance perspective, the judgment provides further clarity on the interpretation of business interruption extensions in the context of the Covid-19 pandemic, particularly clauses referring to the occurrence of a notifiable disease "at the premises".
Background
This case concerned the interpretation of the Closure/Disease Clause in the Devlin Hotel's insurance policy which provided:-
'This insurance is extended to include loss as insured in consequence of…6(A)
A. 'Closure or restrictions placed on the Premises on the advice or with the approval of the Medical Officer of a Public Authority as a result of a notifiable human disease manifesting itself at the Premises'.
The main issue was the interpretation of the wording 'manifesting itself at the Premises'. Both parties agreed that the Court was required to consider the language of the policy in the context of the relevant factual and legal background at the time the contract was concluded.
Decision
'Manifestation'
Rejecting an argument to the effect that the occurrence of Covid-19 at the premises could be assumed given its prevalence in the community at the time, the Court concluded that the term 'manifestation' required some element of revealing or making evident the presence of a notifiable disease. Therefore, undiagnosed or asymptomatic people attending the Devlin Hotel could not be said to have been 'manifesting' the Covid-19 virus.
McDonald J held that the detection of the Covid-19 virus at the Devlin Hotel - for example on a table or bed - could constitute manifestation for the purposes of the Closure/Disease Clause. However the key issue in the Devlin case was that there was no evidence to suggest that the virus had ever actually been detected at the premises.
'At the Premises'
In holding against the plaintiffs, Mr Justice McDonald concluded that except where a case arises immediately outside the premises (such as at the Devlin's coffee hatch or outside dining area), evidence that Covid-19 was experienced in the vicinity of the premises is not a case at the premises.
The Court considered expert evidence that the level of infection in the community provided be a basis to conclude that one or more persons infected with Covid-19 may have been present at the Devlin Hotel in the 14-day period prior to closure in September 2020. McDonald J agreed that while this was a plausible assumption, the interpretation of the Closure/Disease Clause was a matter for the Court to decide. On this basis, it was held that a reasonable person would not equate a background prevalence of Covid-19 in the community with a manifestation of the disease at the premises of the Devlin Hotel and the cover was not triggered.
Conclusion
As noted in our previous publication, the Commercial Court has continued to carefully interpret specific business interruption clauses in the context of Covid-19. In this interpretation, the Court held that there was nothing to show that anything occurred at the Devlin Hotel sufficient to constitute a manifestation of Covid-19 at the premises. This recent decision, along with its predecessors, will provide useful clarity for policy drafters seeking to incorporate greater certainty in respect of the level of risk assumed by insurers providing business interruption cover. It also emphasises the need for both insurers and policyholders to support their position with appropriate evidence which reflects the requirements of the actual policy in terms of triggering cover.
