The Court awaits trial of cover in respect of the Coronavirus

To date, a number of blogs have touched upon the Coronavirus and its effect on contested cover.

There is no doubt that the topic is diverse and complicated. It can merely be touched upon in a blog.

We are now facing some sample cases in respect of business interruption (“BI”) cover to be heard in the High Court in mid-July 2020. Much has been written about the subject but a succinct Webinar has been staged by 39 Essex Chambers and a very meaningful article has been circulated written by Ruth Keating a member of that Chambers. Frankly, it cannot be bettered but certain lines can be drawn from it.

Where are we?

There is undoubtedly lack of clarity about losses under fairly standard sample BI policies now heading for the High Court with eight mainline insurers also involved. Helpfully – at least to itself – the FCA has produced a summary of the issues to be determined in the proceedings.

The issues:

  • Is there cover in principle in respect of BI interference with losses resulting from the insured’s business by the Coronavirus?
  • If there is cover, can the necessary causal link be established between assumed losses and the peril/event/circumstance that is covered?

The FCA has posed several additional questions concerning: effect on BI; what is required for the virus to be in the vicinity; what constitutes denial of access; causation issues; and the effect of exclusions.

The FCA is adopting the policyholders’ position and arguing that the Government’s actions satisfied triggers under the applicable policies. It contends that:

  • (a) there is no explicit exclusion of pandemics from cover;
  • (b) triggers had been satisfied by early/mid March;
  • (c) evidence of the Coronavirus can be proved by statistical evidence;
  • (d) wordings provide cover for losses caused by the disease/trigger over a wide area.

The Trial

The trial of the test cases is there to provide a general coverage outcome. It cannot do more than that. The cases are designed to resolve key contractual uncertainties and causation issues. Many policies will be significantly different from the test cases and will fall outside the ambit of the test cases.

A set of steps has been set down leading to trial. There will be a second case management conference on 26 June 2020 to steer the cases into the July hearing.

Our Destiny

The destiny of the cases may well be the Supreme Court and perhaps the proceedings would leap-frog over the Court of Appeal to get to the Supreme Court. Whatever happens with the court process, there may be a reinsurer posited of last resort underwritten by the Government. The claims here are potentially huge and meeting the quantum could be a challenge for some insurers. The Government is undoubtedly facing huge calls for cash coming from a number of sources but the need to stand tall as an insurer/reinsurer in the face of the Coronavirus is surely not open to debate. The Coronavirus is not unique and together with Cyber liability, we must surely empower ourselves now to be able to cope with pandemics and Cyber problems of the future. They will come. We must not be found wanting

Important: This blog is not intended to be relied on. It is merely a rough outline of the issues as they stand. It is not a substitute for legal advice which interested parties should seek promptly if in any doubt as to what action they should take.