Restaurant fails in Covid claim over ‘all risks’ BI policy

The Kensington Creperie: Judge expressed sympathy

The High Court has rejected a restaurant’s claim that its Allianz insurance policy should pay out for losses suffered after it had to shut during lockdown.

Mr Richard Salter QC, sitting as a deputy High Court judge, stressed the importance of legal certainty rather than changes to the common law in response to the pandemic, and became the first judge to cite the Breathing Space ‘concept note’ issued in April by the British Institute of International & Comparative Law (BIICL)

Gavin Kealey QC and Keir Howie of 7 King’s Bench Walk, who represented Allianz (instructed by DAC Beachcroft) said the judgment also served to confirm “that conventional damage-based business interruption wordings will not normally respond to Covid-19 losses”.

The judge acknowledged that his decision may be “of consequence” for other potential claimants given that Allianz’s standard wording was involved.

“To that limited extent, this judgment is therefore something of a footnote to the comprehensive and (subject to any appeal) authoritative statement of the law and exegesis of the various policy provisions in… the FCA test case.”

TKC London Limited v Allianz Insurance Plc [2020] EWHC 2710 (Comm) concerned a London café business, The Kensington Crêperie, which had to close between 21 March and 4 July.

TKC was insured by Allianz under a standard form business interruption policy, which was written on an ‘all risks’ basis, but did not contain any disease clause or relevant denial of access extension of the type considered in the recent Financial Conduct Authority test case that is heading to the Supreme Court.

The claimant argued that the enforced closure and loss of use of the café constituted an insured ‘loss of property’.

Allianz successfully sought summary judgment. Mr Salter accepted its submission that the policy did not respond to mere temporary loss of use and was only triggered by the physical loss of property.

The court also considered that it was impossible for the claim to satisfy the standard form material damage proviso contained in the ‘basis of settlement’ provisions of the policy.

Subsidiary claims based on the deterioration of stock during lockdown and the loss of use of TKC’s premises licence were also dismissed.

The deterioration of stock did not cause the business to be interrupted or interfered with, “because (as is common ground) it occurred at a point at which that business was already closed as a result of the coronavirus regulations. It was a consequence of the interruption or interference, not its cause”.

In a coda, the judge cited the comments of Mr Kearly, who said the insurer “has every sympathy with those affected” by Covid.

“Allianz also understands that policyholders with [BI] cover will naturally wish to explore the question of whether or not it responds to the losses that they have suffered.

“Equally, however, it is vital for the functioning of such insurance and for the benefit of policyholders with valid claims that Allianz should only pay claims in cases where the policy requirements are satisfied, and not otherwise.”

Mr Salter said it was “impossible not to share that sympathy” and observed that “some readers of this judgment may therefore have the instinctive reaction that an ‘all risks’ business interruption policy such as this ought in justice to provide cover to SMEs such as TKC against the significant damage to their businesses caused by government measures such as the coronavirus regulations”.

Some may also argue, he went on, that the common law should adapt its principles of contractual interpretation and implication to transfer “the burden of the present emergency to those, such as insurance companies and other major financial institutions, who may perhaps better be able to bear it”.

But he quoted the “wise” observations in the BIICL concept note – aimed at heading off a potential wave of coronavirus-related litigation – which said: “In times of uncertainty, the law must provide a solid, practical and predictable foundation for the resolution of disputes and the confidence necessary for an eventual recovery…

“Contractual rights are to be evaluated by applying settled principles to the contract in question. Legal certainty remains paramount and gives the surest basis for resolution.”

Tim Marland, instructed by Memery Crystal, acted for the claimant.

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