The next phase in the Covid-19 BI cases: appeal on "at the premises"

A central causation question was before the Court of Appeal in relation to "at the premises" clauses in the latest Covid-19 business interruption judgment: London International Exhibition Centre Plc v Allianz Insurance plc and others [2024] EWCA Civ 1026.  The Court of Appeal confirmed that the same approach to causation developed by the Supreme Court in the FCA Test Case (Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1) applies to "at the premises" clauses.

Background

The appeals were from the decision of Jacobs J who had determined preliminary issues in six expedited test cases that were heard in succession.  The claims were for business interruption losses suffered as a result of the Covid-19 pandemic.  The common feature of each claim was that the policyholder was relying on an "at the premises" clause for cover. As the name suggests, "at the premises" clauses provide cover in respect of occurrences of a notifiable disease at a particular premises.  These clauses were not considered by the Supreme Court in the FCA Test Case (in which this firm acted for the FCA).

The Supreme Court in the FCA Test Case (concerning different clauses) had found that in respect of disease clauses requiring infectious disease within a specified radius (radius clauses), it was not the objective intention of the parties that the "but for" causation test applied. Further, it was enough to show that the interruption was as a result of government action taken in response to cases of disease which included at least one case of Covid-19 within the geographical area covered by the clause. Essentially each of the individual cases of illness resulting from Covid-19 which had occurred by the date of any government action was a separate and equally effective cause of that action and of the response of the public to it.

At first instance, Jacobs J had found that the same reasoning applied to "at the premises" clauses – see our article on his judgment here.

On appeal, insurers sought to distinguish "at the premises" clauses as being fundamentally different to radius clauses and argued that the Supreme Court decision in the FCA Test Case was exceptional.  The judge should have construed the "at the premises" clauses from the ground up and reached a different conclusion. They argued that the "at the premises" nature of the clause meant the disease at the premises must have led to government action in closing the premises in that the authority must have known about the occurrence at the premises or believed on reasonable grounds there had been such an occurrence. In other words, the government action had to be specific in responding to cases of the disease at the particular premises and not general.

Court of Appeal decision

Causation

In dismissing insurers' appeals, the Court of Appeal were clear that the "but for" causation test did not apply.  The parties could not have intended a conventional "but for" test to apply in circumstances where disease can spread rapidly and it would be difficult or impossible for a policyholder to prove that restrictions would not have been imposed "but for" the occurrence of the disease at the insured premises.  

The Court of Appeal were also clear that the government lockdowns were caused by cases "at the premises" along with all the other cases in the country which had occurred.  It cannot have been intended that a policyholder must prove what knowledge or belief an authority had as to the existence of disease at a given location. This would be a "surprising" precondition for cover which would leave policyholders who in every other respect were in the same position with different coverage outcomes. Although the Court of Appeal agreed with insurers that the correct approach was to begin with interpretation of the policies "from the ground up" rather than starting from the approach by the Supreme Court in the FCA Test Case, they ultimately agreed that the Supreme Court's approach to radius clauses set out in the FCA Test Case applied here.  On the assumption that there were occurrences of Covid-19 at each of the policyholders' premises, those occurrences together with all other cases of Covid-19 in the country were a cause of the closure of those premises.  In ordering the national lockdown, the UK government was responding to the fact of disease having occurred at each of these premises.

Other issues

There were several other issues decided by the Court of Appeal:

• The meaning of "the Medical Officer of Health for/of the Public Authority"
  
  Some policies required the closure to have been made on the advice or approval of a person whose role no longer existed at the time of placement (or claim), namely "the Medical Officer of Health for/of the Public Authority".  In construing this phrase, insurers sought to refer to extensive historical information on the role of different medical officers to challenge the judge's conclusion that the Chief Medical Officer, Deputy Chief Medical Officer and other medical officers advising the government fell within this description. 
  
  In dismissing insurers' appeal, the Court of Appeal held that the judge was right to find that the medical officers advising the government were sufficient for this policy requirement, and that there was no need for the person to be an officer of the local authority only.  Only recent information could possibly form part of the factual matrix available to both parties, and not extensive historical research. The Court of Appeal said it was artificial to construe the phrase by reference to the responsibilities formerly exercised by medical officers of health when they existed because such knowledge was not reasonably available to the policyholder.  The Court of Appeal also gave consideration as to why these words were included in the relevant provision.

• Cover for occurrences of Covid-19 before it became a notifiable disease
  
  Some claimant policyholders argued that cover would be triggered if a person attends the premises suffering from a disease which only subsequent to their visit becomes notifiable.  They argued that the relevant point in time at which to judge whether the disease is notifiable is when the loss arises and is felt by the policyholder, i.e. from the time the business is interrupted, and not when the person was at the premises.
  
  The Court of Appeal disagreed. If the insured peril requires an occurrence of a notifiable disease at the premises, there can be no trigger if the person is at the premises with what is not at that date a notifiable disease.  The same conclusion would apply even if (which was not determined as a matter of fact) there is a retrospective obligation to notify instances of a disease.  Similarly there can be no cover if they have the disease after it becomes a notifiable disease but when they are not at the premises. Both elements have to be satisfied at the same time.
   
• The meaning of "Notifiable infectious disease … suffered by any visitor or employee"
  
  The judge at first instance found that this wording simply meant that the person had to have contracted Covid-19.  The person did not need to have displayed symptoms.  On appeal, insurers argued that this was wrong and that "suffered" in this context meant "manifested".  The Court of Appeal disagreed and upheld the judge's findings.  The Court of Appeal referred to the fact that it would be accurate to describe someone as suffering from cancer if they had the disease even thought they were entirely asymptomatic and the same was true of Covid-19.

Comment

The decision provides helpful clarity for policyholders on a type of clause that was not tested in the FCA Test Case.  It should allow those policyholders with "at the premises" clauses to pursue and resolve their claims with insurers subject of course to any appeal by insurers.