In TKC London Ltd v Allianz Insurance plc [2020] EWHC 2710, the Commercial Court considered the summary dismissal of TKC London Ltd's claim against its insurer, Allianz Insurance plc, concerning certain business interruption losses that arose due the closure of its business in compliance with COVID-19 related governmental measures.
TKC operates the The Kensington Crêperie in London; and, from 21 March 2020, it was required by the Health Protection (Coronavirus, Business Closure) (England) Regulation 2020 to close and cease any sale of food and drink that was to be consumed on the premises. Following the requirements of the regulations, TKC closed The Kensington Crêperie from 21 March to 4 July 2020. The forced closure resulted in significant losses for TKC.
TKC was insured throughout the relevant period by Allianz under a policy that included, amongst other things, a "Business Interruption" section. TKC asserted that the "Business Interruption" section of its policy operated to cover it for the losses that it had sustained as a result of being forced to close The Kensington Crêperie; and, with Allianz refuting their interpretation of the policy, TKC brought an action against Allianz. Allianz responded with an application for summary judgment of TKC's claim on the basis that TKC's interpretation of the policy was misconceived and bound to fail.
The relevant policy wording was as follows. The Business Interruption section provided cover for "Business Interruption by any Event". Business Interruption was defined as:
"Loss resulting from interruption or interference with the business carried on by the Insured at the Premises in consequence of an event to property used by the Insured."
Event was defined as:
"Accidental loss or destruction of or damage to property used by the Insured at the Premises for the purpose of the Business."
TKC advanced the argument that the unforeseen closure of their business could be classified as an Event, as defined in the policy. This was advanced on the basis that "accidental" should be taken to mean little more than something which was "unlooked for or unintended", and that "loss of property" included a temporary loss of use of that property. Allianz refuted these submissions. It submitted that accidental loss could refer only, in the context, to a physical loss of property and that a mere temporary dispossession did not meet this definition. In support of their interpretation of "loss", Allianz also referred to the classic reasoning of Sir Martin Nourse in Tektrol Ltd v International Ins Co of Hanover Ltd1
"Loss" is a word whose meaning varies widely with the context in which it is used. If a man said to you: "I have lost my wife", you would understand him to mean one thing outside the maze at Hampton Court and another outside an undertakers in the high street."
The court agreed that the meaning of "loss" must be determined by reference to its immediate context, and it found in favour of Allianz by accepting that "loss", in this particular context, must necessitate some physical aspect to it; and that "loss" could not sensibly be interpreted to include the temporary loss of use of property. It was on this basis that the court granted summary judgment in favour of Allianz.
This matter was recognised by the court as a "footnote" to the larger FCA Test Case2 surrounding these issues - particularly, as it did not have to consider any disease clauses or denial of access extensions in the circumstances.
The judgment confirms the position that conventional damage-based business interruption insurance wording will generally not be responsive to "pure" COVID-19 related losses.
Footnotes
1. [2005] EWCA Civ 845
2. https://insure.cooley.com/2020/10/06/fca-business-interruption-insurance-test-case-appeal-2/
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