In the matter of Policyholders v China Taiping Insurance (UK) Co Ltd, heard in arbitration before Lord Mance, ex-member of the Supreme Court, it has been determined that the policyholders’ claim in the UK for losses for business interruption as a consequence of closures relating to Covid-19 failed because the instructions to oblige the closures were not issued by either of the specific authorities referenced in the policy wording.
Under the policy Extension 1(b) and (c) dealing with Denial of Access, cover is extended to include interruption or interference with the policyholder’s business in consequence of:
- the closing down or sealing off of the Premises or property in the vicinity of the Premises in accordance with instructions issued by the Police or other competent local authority for reasons other than the conduct of the Insured…..;
- the actions or advice of the Police or other competent local authority due to an emergency threatening life or property in the vicinity of the Premises;
The Policyholders each run hospitality businesses including a variety of restaurants, cafes, bars and public houses. All claimed to have suffered loss within Extension 1 due to interruption of or interference with their businesses, arising from the UK Government’s orders or advice issued at various times in 2020 in response to the Covid-19 pandemic.
However, in his non-confidential arbitration award published on 10 September 2021, while Lord Mance agreed with the Policyholders that losses from Covid-19 could in principle be covered under the Denial of Access provision, he considered that “in so far as the Policyholders claim to have suffered recoverable loss in consequence of the alleged instructions, actions or advice… such claim fails in that the instructions, actions or advice alleged were not issued by or of “the Police or other competent local authority”. In doing so, Lord Mance accepted the submissions on behalf of China Taiping, that the orders and/or advice direct from the UK Government, and which caused the business interruption losses, were in fact outside the scope of Extension 1.
The award is significant (albeit not binding on third parties) in that Lord Mance clearly did not ascribe the same extensive meaning to the title of “competent local authority” as had been decided in the closely-followed test case brought by the Financial Conduct Authority in London in 2020. It will therefore be interesting to watch what guidance (or persuasion) might be taken from the award in any future litigation relating to similar Covid-19 business interruption losses.