Corbin & King decision departs from FCA test case rationale on Prevention of Access Clauses

Corbin & King Limited and subsidiaries (Corbin & King) were owners and operators of 12 well-known restaurants, cafes and other establishments in and around London, including The Wolseley and The Delaunay. On 7 February 2020, AXA Insurance issued to Corbin & King a Business Combined Insurance policy for the period 12 November 2019 to 11 November 2020 (the Policy). 

Corbin & King claimed under the Policy for business interruption losses arising out of access to premises being restricted or hindered as a result of government regulations to combat COVID-19, which imposed the following ‘restrictions’:

1. The first lockdown from 20 March 2020 until 4 July 2020 (the 21 and 26 March 2020 and 4 July 2020 Regulations).
2. Early closing times of 10pm from 24 September 2020 (the 24 September 2020 Regulations).
3. The second lockdown from 5 November 2020 to 2 December 2020 (the 5 November 2020 Regulations).

AXA Insurance denied cover, which led to proceedings being commenced in the English High Court that were expedited for determination in light of the fact that the issues would affect a range of other businesses.

The two key issues in the case were:

1. The coverage issue: whether the NDDA clause provided effective cover for loss resulting from restrictions on access to premises under government regulations passed in response to the COVID-19 pandemic in the course of 2020.
2. The quantum issue: whether, if the NDDA clause did provide cover, there was a single limit of £250,000 in respect of all premises for any one claim, or whether there was a limit of £250,000 for each set of premises.

If there was coverage, AXA accepted that Corbin & King were entitled to an indemnity of up to £250,000 for each of the three restrictions.

Central to the coverage issue in this case were the determinations of the Divisional Court and Supreme Court in the FCA Test Case.

To recap, the Divisional Court’s approach to POA (Prevention of Access), including NDDA and AOCA (Action of Competent Authority) clauses, was generally to find that such clauses were highly unlikely to provide cover for the consequences of COVID-19. In essence, this was because such wordings (referencing for example, an incident, emergency, danger or disturbance in the vicinity or a one mile radius of insured premises) were construed to provide a narrow, localised form of cover not intended to respond to a countrywide pandemic. By contrast, its approach to disease clauses was generally to find cover, except in relation to two clauses (QBE 2 and QBE 3) where cover was said to be limited to specific and localised events. 

The Divisional Court’s findings that certain POA (including NDDA and AOCA) clauses that did not cover losses arising from the COVID-19 pandemic were not challenged on appeal. The Supreme Court did, however, deal with coverage under the disease clauses finding that cover was intended to be confined to the consequences of specific local cases. 

Questions of causation then became critical and the court went on to apply a broad approach to causation. It was found that each case of COVID-19 was a concurrent cause of the restrictions imposed by the government and that it was sufficient to prove that business interruption was a result of government action taken in response to cases of disease, which included at least one case of COVID-19 within the geographical area covered by the clause. The Supreme Court stated that a similar causal analysis applied to hybrid and POA clauses before it, with indications that such analysis should also apply more generally elsewhere.

This led to questions as to whether the Supreme Court’s reasoning on causation should be applied to POA clauses (including NDDA and AOCA clauses) more generally.

On coverage, Corbin & King argued that the Divisional Court’s judgment that NDDA clauses do not provide an indemnity could not stand in light of the Supreme Court’s analysis on causation. They argued that the restrictions were in response to a danger, which was constituted by every single actual or threatened case of COVID-19 at each of the premises or within the relevant radius as well as elsewhere in the UK, each of which was a separate and equally effective cause of each restriction. On quantum, they argued that there was a separate limit for each premise in respect of each restriction.

In reliance upon the Divisional Court findings, AXA Insurance argued that the NDDA clause provided only a narrow, localised form of cover that required proof of the presence or risk of COVID-19 at or within a one-mile radius of the premises, as opposed to the country as a whole, which led to each restriction. On quantum, AXA argued that there was a single limit in respect of all premises for any one claim.