Business Interruption Insurance - does coverage for 'plague' extend to COVID-19?

Restrictions on movement and gatherings, prolonged closure for the likes of the hospitality industry and changes to working practices for sectors continuing to operate, such as construction, are just a few reasons why businesses continue to have cause to visit their business interruption (BI) insurance policies.

Whether or not a BI insurance will respond to the COVID-19 pandemic will depend on the wording of the particular policy. However, this leaves uncertainty for insurers and insured alike. It is no surprise then that the Courts have been asked to step in. We saw this in FCA v Arch Insurance (UK) Ltd and others in which the FCA (on behalf of 8 insurers) brought a test case to the High Court to determine whether sample wording, selected from various policies, provided cover for the COVID-19 pandemic (discussed here). The decision was recently upheld by the Supreme Court.

In recent weeks, the High Court was asked a similar question in Rockliffe Hall Limited v Travelers Insurance Company Limited [2021] EWHC 412. As a hotel and resort, Rockliffe Hall's business had undoubtedly been affected by the COVID-19 pandemic. However, Travelers successfully argued that Rockliffe's BI policy which provided cover for various diseases, did not extend to the COVID-19 pandemic.

The Policy

Rockliffe's BI policy extended to "cover loss directly resulting from interruption to or interference with the Business in consequence of

1. Infectious Disease manifested by any person whilst at the Business Premises which results in closure of the whole or part of the Business Premises by the order of an appropriate competent authority

2. An outbreak of an Infectious Disease within 10 miles of the Business Premises…"

Infectious Disease

The policy provided that "Infectious Disease means…" and went on to list various diseases and illnesses, including 'Food and Drink poisoning', 'Meningitis' and 'Plague'. But what was meant by 'Plague'?

Rockliffe suggested that 'Plague' didn't just mean specific diseases, such as the notorious bubonic plague or pneumonic or septicemic plague. Instead, Rockliffe argued that 'Plague' took on a different meaning, also given in various medical dictionaries, that is a general term for an infectious disease with a high mortality rate – an epidemic or a pandemic. That being so, Rockliffe contended that the policy should respond to disruption caused by COVID-19.

The Decision

However, the Court was not convinced. Reading the policy as a whole, it was clear that 'Plague' was a reference to the specific disease and not to pandemics or epidemics in a general sense. Otherwise, most of the list would have been redundant as many of the diseases listed would have been classed as an 'infectious disease with a high mortality rate'. The word 'Plague' was also cushioned among other distinct diseases, such as 'Cholera' and 'Smallpox', making a broad sweeping definition less likely.

The list was also said to be exhaustive given the use of the phrase 'Infectious disease means' rather than 'includes'. COVID-19 was not present on the list, nor was the virus which causes it (SARS), and so Rockliffe's claim failed.

Problems posed by interpreting BI policies

In this case, the Court stressed that a different decision may have been reached depending on how the word 'plague' was used and where it was placed. For example, if the term 'a plague' sat among events such as 'famine', 'war' and pestilence', it could more easily be read as 'pandemic' or 'epidemic'. While working out exactly what a BI policy intends to cover seems like a straightforward task, problems can arise, in particular when dealing with novel situations such as the COVID-19 pandemic. Policies, like contracts generally, can be drafted in a variety of different ways, so this case may provide some assistance on how such clauses are to be interpreted.

While cases such as Rockliffe are helpful in providing clarity, what a particular policy or contract means will always turn on the specific wording and context of the document in question. Given that the effects of COVID-19 are continuing to be felt across all sectors, it is recommended that the wording of existing and new policies and contracts are reviewed to understand how they respond to COVID-19.