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Paying the Price of the Pandemic: Business Interruption Insurance and Covid-19

By Sam Knight, Underwriter

(Estimated reading time: 1 minute 35 seconds)

The Covid-19 pandemic brought unprecedented challenges to businesses across the UK and throughout the world. The hospitality sector was one of the worst effected, with waning footfall and weary customers told to stay at home and protect the NHS.

Many businesses sought to rely on their business interruption insurance policies taken out before the extraordinary reality of Covid-19 set in. But that led to a question for the insurers, namely: does the business interruption policy cover such an extraneous circumstance?

According to the High Court in Corbin & King Limited & Ors v Axa Insurance UK PLC [2022] EWHC 409 (Comm), there are circumstances where it does. In that case, cover was offered to the Claimants on the basis that ‘actions taken by the police or any other statutory body in response to a danger or disturbance at your premises or within a one-mile radius of your premises’ constituted a business interruption and thus the policy covered such losses.

Mrs Justice Cockerill found that ‘COVID-19 is capable of being a danger within one mile of the insured premises, which, coupled with other uninsured but not excluded dangers outside, let to the regulations which caused the closure of the business and caused the business interruption loss’.

The case requires insures to go back to the drawing board and be clearer about what is and is not excluded from their business interruption policies. In all likelihood, 2022 will be a year flooded with similar cases disputing insurance coverage in the light of the Covid-19 pandemic.

It may be wise for parties to such a dispute to take out ATE cover and ensure that their interests are protected by minimising their adverse costs risk, particularly in the wake of the pandemic. Temple Legal Protection offers fully deferred and contingent policies that could protect your client and help to get them back on their feet at this trying time, protecting their interests in a commercially sensitive fashion.