Numerous hospitality and other businesses suffered crushing losses when they were denied access to their commercial premises during COVID-19 lockdowns. However, many of them can take comfort from the High Court’s ground-breaking ruling that a group of restaurants enjoyed insurance cover against such losses.
Owners and operators of the restaurants were covered by a business interruption insurance policy that included a commonly used denial of access (non-damage) clause. The clause covered losses arising from interruption or interference with the claimants’ business where access to their premises was restricted or hindered for more than a specified period.
In order to fall within the ambit of the clause, the hindrance or interference had to arise due to actions taken by the police or any other statutory body in response to a danger or disturbance at their premises or within a one-mile radius of the same. The claimants argued that the clause covered them for losses arising from COVID-19 regulations which excluded them from their premises. They launched proceedings after their insurers took a contrary view and denied cover.
The insurers argued that the clause covered transient, localised dangerous incidents or disturbances in response to which official action is taken at a local level to prevent access to an insured’s premises. They suggested paradigm examples of a bomb scare, structures at risk of collapse or an affray. An ongoing national and international pandemic was far removed from those examples.
Ruling in the claimants’ favour, however, the Court found that the clause provided a localised cover, but one which was capable of extending to disease. COVID-19 was capable of presenting a danger within one mile of the claimants’ premises. That, coupled with other uninsured but not excluded risks outside that radius, led to the regulations that required closure of the claimants’ premises. Subject to proof of loss, the ruling meant that the insurers were bound to indemnify the six claimants who benefited from the clause up to a maximum of £750,000 in respect of each of their premises.