“At the Premises” clauses in business interruption policies

The Court of Appeal decision in London International Exhibition Centre Plc v. Allianz Insurance Plc & Ors [2024], is the latest decision to consider how business interruption (BI) policies respond to COVID-19 related losses.

This appeal, heard between 18 to 21 June 2024, derived from the High Court decision of Mr Justice Jacobs who determined a series of preliminary issues in connection with five test cases.  

Court of Appeal’s Decision

The Court of Appeal was asked to determine whether national government restrictions imposed in response to the COVID-19 pandemic were, in principle, capable of triggering cover under non-damage BI policies with an ‘at the premises’ clause. ‘At the premises’ clauses generally provide cover for loss caused by notifiable disease occurring at the insured premises. 

At first instance, Mr Justice Jacobs of the High Court ruled that the causation approach applied by the UK Supreme Court (UKSC) to ‘radius’ clauses in Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] (the FCA Test Case), should also apply to ‘at the premises’ clauses. 

The Court of Appeal found that: BI policies with ‘at the premises’ clauses respond in a similar manner to the ‘radius’ clauses considered by the UKSC in the FCA Test Case. Consistent with the UKSC’s findings in the FCA Test Case, Therefore, where a policyholder is able to prove, on the balance of probabilities, that there was an occurrence of COVID-19 at the insured premises prior to the government action, that will satisfy the causation test to trigger cover under an ‘at the premises’ clause in the Policy.

This is not an unexpected outcome and it remains to be seen whether there will be a further appeal to the UKSC.

The Court of Appeal’s judgment also addresses:

• Additional issues of construction that are specific to the individual wordings in the cases considered by the Court of Appeal, including, in particular, the proper interpretation of: (i) clauses which respond to actions of “the Medical Officer of Health for the Public Authority”; and (ii) clauses which respond to disease “suffered” by visitors to the policyholder’s premises.
• A cross-appeal by policyholders concerning the significance of the date on which COVID-19 became a notifiable disease, holding that occurrences of COVID-19 before 5 March 2020 will not qualify as relevant occurrences of the disease for the purposes of an ‘at the premises’ clause (and that this applies equally for the purposes of disease clauses and hybrid clauses).

Impact on insurance claims

Although the Court of Appeal has confirmed that ‘at the premises’ clauses are triggered in much the same way as ‘radius’ clauses, in practice, this decision may not enable policyholders with ‘at the premises’ clauses to obtain cover for their COVID-19 related BI claims, and in particular, for claims concerning the first lockdown in March 2020. This is because policyholders will still be required to prove, on the balance of probabilities, that a case of COVID-19 occurred at the insured premises after COVID-19 was declared a ‘notifiable disease’ on 5 March 2020 but before the government restrictions were introduced in or around 20 March 2020. This may be challenging for policyholders, given that widespread testing was not available and few people received a diagnosis for COVID-19 in the early months of the pandemic.

It is noteworthy that the judgment does not discuss in any detail what will qualify as proof of COVID-19 at the premises. In the absence of any judicial commentary on this point, it seems likely that insurers will continue to mirror the position that has been adopted by the Financial Ombudsman Service when dealing with ‘at the premises’ claims.  As a result, a policyholder will still be required to provide good evidence that COVID-19 was present at the premises at the relevant time, and not another disease. 

We suspect that, in many cases, this will be an evidential hurdle that the majority of policyholders will be unable to clear.

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