No Covid? No cover: High Court dismisses Covid-19 business interruption claim under 'closed list' disease wording

In Rockliffe Hall Limited v Travelers Insurance Company Ltd [2021] EWHC 412 (Comm), Travelers succeeded in obtaining strike out/summary judgment against a policyholder’s Covid-19 business interruption claim because Covid-19 was not specifically included in the policy’s ‘closed list’ of specified diseases.

These types of ‘disease clauses’, which list covered diseases (but typically not Covid-19), were not considered by the High Court or Supreme Court in FCA v Arch and others (the FCA Test Case). The decision is unlikely to be the cause of controversy, but does bring some guidance to those policyholders with ‘closed list’ disease clauses in their policies.

The decision also provides a salutary warning to lawyers tempted to advance arguments of contractual construction based on a “minute, blinkered and reductive focus on the individual components of [a] clause”. Cockerill J warned that such an approach has been “repeatedly deprecated” by the courts.

Background

Rockliffe Hall is a golf course and hotel in County Durham whose business was seriously disrupted by the Covid-19 pandemic. Travelers provided Rockliffe Hall with insurance coverage for business interruption under a policy which was extended to include ‘Infectious Disease etc.’ (the Infectious Diseases Extension). This Infectious Disease Extension specifically defined the diseases covered under the policy by reference to a list of over 30 illnesses and ailments which included “Plague” but not Covid-19 (nor SARS).

Rockliffe Hall made a claim for its Covid-19 business interruption losses under the policy which Travelers duly declined on the basis that the Infectious Disease Extension was a closed and exhaustive list which did not cover Covid-19.

Rockliffe Hall issued proceedings and Travelers sought to strike them out pursuant to CPR 3.4 and/or applied for reverse summary judgment under CPR 24.2. It was, therefore, incumbent on Travelers to show that Rockliffe Hall’s claim disclosed no reasonable grounds for bringing the claim and/or that Rockliffe Hall had no reasonable prospect of succeeding on its claim.

Decision

The High Court granted Travelers’ application and struck out Rockliffe Hall’s claim (and granted reverse summary judgment to the extent necessary).

The Court found that the starting point in such cases is a careful reading of the relevant parts of the policy in context and bearing in mind that the notional ‘reasonable person’ employed in questions of contractual interpretation is not a lawyer. The Court’s “immediate provisional indication” on reading the policy was that the a claim for Covid-19 business interruption losses was not covered because Covid-19 was not on the list of covered diseases.

Importantly, the Court found that, because the Infectious Diseases Extension said “Infectious Disease means…” the subsequent list of diseases extension was closed. It was not indicative of the kind of diseases that were included: it was exhaustive.

The High Court also considered Rockliffe Hall’s argument that Covid-19 was covered by the word “Plague” because its meaning was not only the specific illness caused by Yersinia pestis (the most notorious of which is bubonic plague) but also a general infectious disease which spreads rapidly and lethally.

The Court rejected the argument. There was nothing in the pleadings that indicated that the policy was a bespoke wording or which suggested a “private dictionary” meaning (i.e. non-natural but understood between the parties) of the word “Plague”. Whilst the Court noted that Travelers could have referred to “bubonic plague” in the wording, this did not really advance matters. The plain and dictionary meaning of the word referred to Yersina pestis-caused illness. “Plague” did not mean “a plague”.

Rockliffe Hall’s alternative argument was that because some of the diseases listed in the Infectious Diseases Extension were capable of having more than one cause, what was insured against was “the state of affairs or condition which arises” and not the specific pathogens. Thus Covid-19 came within the policy coverage. The Court rejected this “clever lawyer’s construct” as not credible and criticised the “minute, blinkered and reductive focus on individual components of the clause” as an approach which has been “repeatedly deprecated in the authorities”. The plain meaning of “Plague” was clear and it was “fanciful” to suggest a reasonable reader would consider it included Rockliffe Hall’s extended interpretation. It was the specific disease itself which was insured under the policy and the fact that it could arise by multiple causes did not introduce any lack of clarity.

Fundamentally, in the High Court’s view, these types of clauses – with ‘closed lists’ – operated very differently from the ‘disease clauses’ considered in the FCA Test Case. In those cases, the ‘disease clauses’ clearly incorporated an externally-maintained and dynamic list of illnesses which were regularly updated (‘notifiable disease’). Here, the policy’s approach was to adopt a static, limited list which did not have any mechanism for external update.

Comment

Whilst the decision may be disappointing to policyholders who have ‘closed list’ disease clauses in their policies, the judgment accords with the obvious meaning of the words used in the policy. The Judge also sounded a warning to those parties (and their legal advisors) who are tempted to put forward seemingly ingenious arguments of policy construction. This is relevant to Covid-19 business interruption insurance claims but ought to be read as having wider application. The Court in Rockliffe Hall v Travelers was clearly not well-disposed to such “clever lawyer’s construct(s)” given the rather stark terms in which Cockerill J expressed herself in the judgment about the need to heed the accepted principles of contractual interpretation and that overly-worked constructions which stray too far from these are unlikely to find favour.