The recent case of FCA v Arch and others  EWHC 2448 (Comm) considered whether policyholders of a number of business interruption insurance products were entitled to cover in respect of the recent Coronavirus pandemic.
Two of the wordings considered were the QBE Business Combined Insurance Policy (QBE1) and the QBE Commercial Combined Insurance Policy (QBE3).
QBE1 was found to provide cover for COVID-19 interruption caused by the national government or public response to the disease in general, providing that a case of COVID "manifested" (that is to say was symptomatic or diagnosed) within the relevant 25 radius. The requirement for the condition to be symptomatic or diagnosed was more onerous than other disease wordings, which were satisfied by an occurrence of COVID whether or not symptomatic or diagnosed. As with QBE2 [Click here to read an article on that policy], QBE3 referred to an occurence of the disease within the relevant radius as "an event," which their Lordships construed (following the case of Axa Reinsurance v Field  1 WLR 1026) as requiring "something which happens at a particular time, at a particular place, in a particular way," that is to say a specific occurrence rather than a state of affairs. Accordingly, their Lordships held that there would only be cover under QBE3 if "the particular occurrences of the disease within the 25 mile radius caused the business interruption or interference." Consequently, interruption caused by a national response to a national outbreak would not be covered.
QBE Business Combined Insurance Policy (QBE1)
“Murder, suicide or disease
interruption of or interference with the business arising from:
a) any human infectious or human contagious disease (excluding Acquired Immune Deficiency Syndrome (AIDS) or an AIDS related condition) an outbreak of which the local authority has stipulated shall be notified to them manifested by any person whilst in the premises or within a twenty five (25) mile radius of it;
b) actual or suspected murder, suicide or sexual assault at the premises;
c) injury or illness sustained by any person arising from or traceable to foreign or injurious matter in food or drink provided in the premises;
d) vermin or pests in the premises [sic];
e) the closing of the whole or part of the premises by order of a competent public authority consequent upon defect in the drains or other sanitary arrangements at the premises.
The insurance by this clause shall only apply for the period beginning with the occurrence of the loss and ending not later than three (3) months thereafter during which the results of the business shall be affected in consequence of the damage [sic]”
QBE Commercial Combined Insurance Policy (QBE3)
3.4.8 Notifiable disease, murder or suicide, food or drink poisoning
Loss resulting from interruption of or interference with the business as covered by this section in consequence of any of the following events:
a) an occurrence of a notifiable disease at the premises or attributable to food or drink supplied from the premises;
b) the discovery of any organism at the premises likely to result in the occurrence of a notifiable disease;
c) an occurrence of a notifiable disease within a radius of one (1) mile of the premises;
d) the discovery of vermin or pests at the premises which causes restrictions on the use of the premises on the order or advice of the competent local authority;
e) an accident causing defects in the drains or other sanitary arrangements at the premises which causes restrictions on the use of the premises on the order or advice of the competent local authority;
f) an occurrence of actual or suspected murder, suicide or actual or alleged sexual assault at the premises.
i) the insurer shall only be liable for loss arising at those
premises which are directly subject to the incident;
ii) the insurer shall not be liable for any costs incurred in cleaning, repair, replacement, recall or checking of property except as provided for in the Property section.
‘Notifiable disease’ means illness sustained by any person resulting from any diseases that may be notifiable under the Health Protection (Notification) Regulations 2010.”
Accident was defined as-
“A single and unexpected event, which occurs at an identifiable time and place.”
The Court's judgment of coverage under QBE Business Combined Insurance Policy (QBE1) is at paragraphs 224-229 and the QBE Commercial Combined Insurance Policy (QBE3) is at paragraphs 236 - 238.
In relation to QBE1, the Court held:
- In relation to the requirement that the disease should be manifested by someone within the relevant radius, "We do not consider that it is possible to speak of someone who is asymptomatic and has not been diagnosed as having the disease as having “manifested” it".
the required causal link (“arising from”) is between the interruption or interference with the business on the one hand and the notifiable disease on the other, provided it has been “manifested” by a person within the 25 mile radius.
cover is provided for the effects of a notifiable disease on the business, if the disease has come to or within the specified distance of the premises; and is not provided solely for the consequences of the particular manifestation of the disease by one or more individuals who happen to be within the radius.
insurers clearly cannot, on this basis, contend that the occurrence of the disease elsewhere, or the reaction to it, are to be regarded as separate causes.
sufficient causation of the business interference if the disease which has manifested itself in the radius is an effective cause of that business interference.
In relation to QBE3, the Court held:
- the correct construction of QBE3 was "not as clear" as QBE2.
- the reference to "events", "an occurrence" [cf "any occurrence"], and "incident" "confined cover to the consequences of certain happenings, in particular specific occurrences of the disease within the radius, as opposed to other happenings or events, including instances of people contracting the disease outside the radius" .
- This was reinforced by the fact that the radius in QBE3 was 1 mile as opposed to 25 miles. "What is being contemplated is specific and localised events."
KEVIN HOLDER © 2020
33 BEDFORD ROW
NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.