The UK Supreme Court ruled Friday that businesses can receive insurance payouts for losses sustained due to the COVID-19 lockdown.
The public health measures mandated by the UK government amidst the COVID-19 pandemic has resulted in heavy financial losses to businesses around the country. Such losses owing to COVID-19 resulted in business owners to make claims on their insurance. Many claims have been declined on the grounds that the policies do not cover the effects of the pandemic.
Proceedings in the initial stage were brought by the UK’s Financial Conduct Authority under the Financial Markets Test Case Scheme. The ruling of the High Court of Justice was deemed unfavorable by both the parties and the decision was appealed.
The urgency and importance of this matter resulted in the case directly being heard by the Supreme Court, bypassing the Court of Appeal under the “leapfrog” procedure.
The Supreme Court focused on the interpretation of various clauses of insurance policies. Considering the circumstances surrounding the case, it found that the measures taken were proximate in nature. In light of the information on COVID-19 available in the country. It was found that any steps taken as a precaution due to even a single COVID-19 patient being near the vicinity and resulting in a business interruption will substantiate the insurance claims on the ground of proximity. The Supreme Court also expressly affirmed that even losses caused by other uninsured effects of the pandemic will not result in the exclusion of insurance cover provided for diseases.
The judgment expressly overrules the Commercial Court’s judgment in the Orient-Express case, in which a claim was made for the losses sustained due to the interruption caused by hurricanes Katrina and Rita in 2005. The insurance holder claimed physical damage and subsequent loss to business due to the damage to the city of New Orleans. The court accepted the contention that the insurance claim is restricted to the physical damage caused to the hotel and not be extended to losses caused by subsequent damage to the city. The overruling results in a wider ambit of interpretation of trend clauses in insurance.