Hermès Marangos, Adriano Stagni and Jana Blahova’s chapter on Insurance Litigation in the UK published in Lexology’s Getting The Deal Through

• Limitation: one should ensure that, if acting for the claimant, the claim is within the limitation period.
• The dispute resolution clause and choice of law: it is very important to consult the policy wording, to see what method of dispute resolution is provided for, and under which law. It is common for insurance disputes to be arbitrated, and for this to be reflected in the policy.
• Pre-action steps such as protocol compliance and mediation: insurance disputes rarely call for onerous pre- action steps, but it is worth checking to avoid being penalised. The court will certainly want to see evidence that the parties have first attempted mediation.
• Time and cost: the English court system requires a certain level of front-loading of court costs, which should be considered at the outset of a dispute. There will likely be at least a year between commencing a claim and the trial. The winning party may be able to redeem most of their costs from the other side after judgment.
• Disclosure: disclosure is quite an onerous obligation in the English legal system, as parties must disclose documents that both help, and are adverse to, their case. As a result, this can be quite a timely and expensive process.
• Appeals: the right to appeal a decision is not automatic in every venue in the English court, and can be at the judge’s discretion. In addition to this, an appeal can take up to a year to execute, which usually has serious cost implications for both parties. Arbitration typically carries little scope of appeal.
• Confidentiality: it is important to bear in mind that, unlike arbitration, litigation in the English courts is public (unless there is very good reason for it not to be).
• Mitigation: the party seeking to prove they have suffered a loss is under a duty to mitigate said loss. If this is not done, then any compensation awarded may be reduced as a result.
• Commercial relationships: it is important to consider at the outset of a dispute whether litigation is the best course of action. It can irrevocably damage any continuing business relationship between parties, and so negotiation or mediation may sometimes be a better way forward.

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Damages

What remedies or damages may apply?

For the insured

The insured will most likely want a full and timely indemnity as allowed for by the policy. In a departure from historical treatment of late payment, the Enterprise Act 2016 introduced an implied term in insurance contracts whereby insurers must pay sums ‘within a reasonable time’ (although this can be contracted out of in non-consumer contracts). A breach of this implied term will give rise to a claim for damages. The insured must bring a claim for late payment within one year of payment by the insurer.

For the insurer

The insurer will most likely want a declaration of non-liability for the claim in question. Before the Insurance Act 2015 (the Act) came into effect, the main remedy for an insured’s breach was avoidance of the claim (if the breach was of a warranty or a condition precedent, or in the case of material non-disclosure). Since August 2016 (when the Act came into force), however, the remedies available to the insurer have been altered. The Act applies to consumer contracts (except for Part A). It will also apply to non-consumer contracts, to the extent that its provisions (all but the section prohibiting basis clauses, which will apply regardless) are not contracted out of by the parties. The new remedies are as follows.

• A breach of warranty will now suspend the policy, rather than avoiding it, and so the insurer will continue to be liable if the breach is remedied before the loss occurs. This is because, under the Act, all warranties have become ‘suspensive conditions’. All bases of contract clauses (when pre-contractual representations are converted into warranties) are now prohibited, and parties are not able to contract out of this position.
• The duty of disclosure now falls within a wider duty on the insured to provide insurers with a fair representation of the risk. If a breach is not deliberate or reckless, then the aim will be to put the insurer in the position that it would have been in had there been fair disclosure as follows:

1. where the insurer would have declined the risk, the policy can be avoided;
2. where the insurer would have accepted the risk but with additional contractual terms, the contract will be treated as if these terms were included; and
3. where the insurer would have charged a greater premium, the claim will be scaled down proportionately.

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Under what circumstances can extracontractual or punitive damages be awarded?

The general rule is that extracontractual or punitive damages will almost certainly not be awarded for breach of contract under English law. The court may award simple interest as provided for by the Supreme Court Act 1981.

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Interpretation of Insurance Contracts

Rules

What rules govern interpretation of insurance policies?

Insurance policies are interpreted in accordance with the general principles of contractual construction. This means that the court will take an objective and commercial approach in trying to decipher the intentions of the parties at the time of agreeing the policy in question. This will be achieved by reference to what a reasonable person, having all the background knowledge that would have been available to the parties, would have understood them to be using the language in the contract.

The Consumer Rights Act 2015 serves to protect the insured against terms in policies that are deemed unfair. If a term is not deemed transparent or prominent within the policy, then it can be assessed for unfairness and can in turn be challenged.

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Ambiguities

When is an insurance policy provision ambiguous and how are such ambiguities resolved?

An insurance policy provision will be deemed ambiguous if there is more than one credible interpretation. This ambiguity will be resolved by applying the following principles, to fulfil the objective set out in ‘Rules’, that include:

• the natural meaning of words: the starting point will be the natural meaning of the words used, although in an insurance context, words in a policy, specifically loss-causing events, can have multiple natural meanings;
• a precedent: the court will consider previous decisions to help decide an ambiguous provision, but they will not be bound by these;
• contra proferentem: any ambiguity will be decided against the person who drafted the policy, which will usually be the insurer, but may sometimes be the broker (as agent to the insured);
• the extrinsic evidence: the court takes an objective approach to ambiguous provisions, and so extrinsic evidence will not be considered;
• business common sense: if a provision is ambiguous and there is more than one possible construction, the court will choose the one that makes the most commercial sense, but they will not reject the meaning simply because one party made a bad bargain;
• implied terms: the court is reluctant to move away from express wording, but they may be willing to imply certain terms if they still cannot ascertain the meaning; and
• the Consumer Rights Act 2015: if a term in a consumer contract, or a consumer notice, could have different meanings, the meaning that is most favourable to the consumer will prevail.

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Notice to Insurance Companies

Provision of notice

What are the mechanics of providing notice?

Typically, the insurance policy will specify how and when a notification should be made (in addition to what needs to be notified). Any notice requirements should be strictly complied with, so that cover cannot be denied. The insured must give the insurer the details of the loss, including the time and place, to enable the insurer to obtain sufficient evidence to meet the claim. There is likely to be a time limit to give notice of a claim, after which cover may be refused. As of 4 May 2017, indemnity insurers are also under a time limit, whereby they have a legal obligation to pay valid insurance claims within a reasonable time. This duty applies to all insurance and reinsurance policies taken out, varied or renewed from 4 May 2017.

Blanket notifications, covering unknown losses or events, may well be rejected by the insurer. It is therefore prudent for the insured to be as specific as possible about the facts giving rise to the claim.

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Obligations

What are a policyholder’s notice obligations for a claims-made policy?

Under a claims-made policy, the policyholder must notify a claim during the period agreed under the policy, but the liability on the insured may have occurred before the policy.

The policyholder is also under a duty of fair representation, which means that they will have to disclose every material circumstance that he or she knows or ought to know, or sufficient information to put a prudent insurer on notice that it needs to make further enquiries into the identified material circumstances.

Law stated - 25 April 2023

Timeliness

When is notice untimely?

Notice of a loss or a claim must be given within the time specified by the policy itself, or upon the occurrence of the event giving rise to the loss or claim.

Giving notice of circumstances, which may give rise to a loss or claim, must be done as soon as reasonably practical or possible. It is best to be prudent to avoid denial of coverage, although it can be difficult to predict whether a claim will emerge.

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What are the consequences of late notice?

The consequences of late notice will vary depending on the wording of the policy, and whether the notice provision is a condition precedent to indemnity or a condition. If notice is considered to be just a bare condition of the contract, then the insurer will have to prove harm to avoid the policy.

Before the Act came into force, conditions precedent had to be fully complied with on a very strict basis. If the insured breached one of these then the insurer could refuse cover, regardless of whether they had suffered any material harm or prejudice as a result. Now breach of conditions precedent does not allow the insurer to deny cover, provided that the insured can prove that non-compliance could not have increased the risk of the loss that occurred. This protection is only available in consumer contracts, and, more importantly, only if the term does not ‘define the risk as a whole’.

If a notice provision is deemed to be caught by this protection, in practice the insurer will likely deal with a breach by claiming that they have been prejudiced by the late notice. They will argue that, as a result, they have been unable to properly investigate and deal with the claim, and so will reduce compensation available to the insured (potentially by up to 100 per cent depending on the harm caused by the breach).

The Court of Appeal has recently stressed that conditions precedents will only be deemed as such if they are set out in very clear terms, and any ambiguity will be decided in favour of the insured. In addition, Denso Manufacturing v Great Lakes Reinsurance [2017] EWHC 391 (Comm) considered that claims cooperation conditions and conditions requiring the provision of information were more than capable of being conditions precedent, as the ‘commercial purpose of [these] conditions is obvious’, and in this case they related to a liability that had already arisen.

Law stated - 25 April 2023

Insurer's Duty to Defend

Scope

What is the scope of an insurer’s duty to defend?

As a general rule, under English law, an insurer is not under any duty to defend a claim made against an insured. The policy may, however, provide that the insurer will do so (usually subject to the insurer’s view on whether a defence has a reasonable chance of success). Insurers may agree to this obligation in a bid to make their policies more attractive. In this situation, a contractual duty to defend will materialise, and any breach of this will give rise to a claim for damages and other remedies for breach of contract.

The more common practice is to have subrogation and assignment clauses contained in the policies. A subrogation clause gives the insurer the right, once it has paid the insured under the policy, to ‘step into their shoes’ and recoup some if not all of their losses from a third party. This secondary claim would be in the name of the insured, from whom the insured would then claim any sums received by way of compensation. An insurer may also be subrogated to any benefits that a court may award, for example, interest and costs. An assignment of the rights under the policy required agreement of the parties, and will enable the insured to pursue the claim in their own name.

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The insurer may agree to a contractual duty to defend a claim, but this will usually have a caveat of only arising if there is a reasonable chance of a defence succeeding. A dispute may arise between the parties as to what constitutes a ‘reasonable chance’, in which case the parties would follow the dispute resolution mechanism outlined in the policy itself.

Law stated - 25 April 2023

Standard Commercial General Liability Policies

Bodily injury

What constitutes bodily injury under a standard CGL policy?

Commercial general liability is now used in the insurance market to describe some insurance policies in England and Wales. These policies are more widely described as being public and product liability policies, which provide cover in respect of an insured’s liability to third parties in respect of personal injury or property damage caused by the insured. It is normal for personal injury to be defined by the policy and these definitions usually cover injury, sickness, disease and death resulting from such an injury.

Law stated - 25 April 2023

Property damage

What constitutes property damage under a standard CGL policy?

Property damage in a public and product liability policy is typically defined as being loss or physical damage to the property of a third party.

Law stated - 25 April 2023

Occurrences

What constitutes an occurrence under a standard CGL policy?

Public liability policies are occurrence-based, when the policy is triggered on the occurrence of the insured event – usually bodily injury or property damage specified in the policy. In contrast, product liability policies can be occurrence or claims-made policies. Under a claims-made policy, indemnity is triggered by notification of a claim or circumstance to the insurer.

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How is the number of covered occurrences determined?

Typically, a policy will specify a certain level of cover per claim, and that the total cover provided will be subject to an aggregation of claims, whereby all claims arising out of the same occurrence are treated by the insurer as a single claim. Whether or not different claims ‘aggregate’ for the purpose of cover has been the subject of a great deal of litigation and its outcome is usually sensitive to the relevant facts and policy wording. Nevertheless, analysis of what is an occurrence is considered by reference to a number of factors including time and location.

In March 2017, the Supreme Court handed down one of the most important judgments related to aggregation provisions in recent years, in AIG Europe Limited v Woodman and others [2017] UKSC 18. The decision provided useful guidance on the meaning of the phrase ‘a series of related matters or transactions’ when used in an aggregation clause, namely that this requires some ‘real connection’ between the transactions. The judgment also serves as a reminder that the application of any aggregation clause is a fact-sensitive exercise

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Coverage

What event or events trigger insurance coverage?

There are crucial differences between occurrence-based and claims-made policies. Policies written on a loss-occurring basis are triggered by the occurrence of bodily injury or relevant damage (as specified by the policy). Claims-made policies are triggered by notification of a claim or circumstance to the insurer. For this reason, compliance with notification provisions is essential to ensuring cover is provided under a claims-made policy.

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How is insurance coverage allocated across multiple insurance policies?

One insurer may pay the claim and then seek recovery from the other insurers; however, insurers will often include wording to exclude cover if there is more than one policy.

Law stated - 25 April 2023

First-Party Property Insurance

Scope

What is the general scope of first-party property coverage?

First-party property insurance provides cover for loss or damage to an insured’s goods or buildings, or both, following the occurrence of an insured event. Policies can either specify an event that is insured against or operates as an ‘all risks’ policy.

The goods covered by this insurance are usually listed in the policy and are only covered if they are stored in a specified location (eg, artwork kept in a secure gallery or a car kept in a garage). Typically, first-party property policies will include a number of exclusion clauses covering normal wear and tear that occurs during normal use of the specified goods, arson and fraud.

Policies also usually include an excess (or deductible), which is the amount of loss the insured is responsible for before it is entitled to be indemnified by insurers.

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Valuation

How is property valued under first-party insurance policies?

Under an unvalued policy, the insured property is valued as at the date of the reported loss, with the principle that an insured is barred from recovering more than this amount (ie, the actual loss suffered).

As the name would suggest, a valued policy allows the insured to fix the value of an insured item as at the date of the policy. The insured can therefore recover the full value insured if a total loss of the property is sustained. Typically, valued policies are purchased for high-value single items, such as jewellery or artwork.

Law stated - 25 April 2023

Natural disasters

Is insurance available in your jurisdiction for natural disasters and, if so, how does it generally apply?

Insurance against losses arising from natural disasters is widely available in England and Wales. Policies will usually specify the location of the insured risk, with most polices having extraterritorial effect given that natural disasters such as hurricanes, wildfires and earthquakes do not occur in England. Insureds should always carefully consider governing law and jurisdiction clauses in policies that operate with extraterritorial effect, as well as stating the currency in which claims will be paid.

Natural disaster policies are occurrence-based policies and therefore issues of aggregating numerous occurrences into a single claim (establishing the cause of occurrence of a particular loss can be particularly challenging in the wake of a natural disaster) can lead to litigation between insurer and insured.

Following the November 2019 flooding in South Yorkshire, the government commissioned an independent review following reports that some residents did not have flood insurance cover. On 5 November, the review was published, which highlighted that some residents in high flood-risk areas were being sold coverage that contained exclusions for flooding damage. The government responded to the review on 29 July 2021 and broadly accepted the review’s recommendations, namely that the Association of British Insurers provides information on the number of policies that contain flood exclusions and for insurers to increase their communication with tenants, households and businesses in high flood-risk areas about the availability of flood insurance. This incident also highlights the importance for insureds to verify that the conditions of their insurance are suited to actual conditions to ensure maximum protection of the insured asset.

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Pandemic

Is insurance available in your jurisdiction for pandemic-related losses and, if so, how does it generally apply?

Other than travel and medical covers, that provide for specific covid related expenses, the typical lines of business insurance do not provide cover at present.

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D&O policies are claims-made policies that protect the insured from loss suffered as a result of a third-party claim following an alleged wrongful act by the insured. Policies normally define ‘wrongful act’ as an actual or alleged breach of a director’s duties, the making of misleading statements, misrepresentations or other errors or omissions that give rise to a claim. As is the case with other claims-made policies, a claim notified in 2020 that is still ongoing in 2023 is covered under the 2019/20 policy and will be excluded from the 2022/23 policy.

Coverage under D&O policies is usually broken down into three ‘sides’ of the policy wording:

• Side A cover – covers losses suffered as a result of a claim against a director or officer that cannot be indemnified by the company;
• Side B cover – covers indemnifications made by the company to a director or officer in respect of a claim made by a third party; and
• Side C cover – covers claims brought against the company by its shareholders.

In addition to the cover above, the policy will also specify if there is a deductible to be retained by the insured, and any exclusions or exceptions to cover. Typical exclusions are fraud and for ‘insured v insured’ claims when a director who is also a shareholder makes a claim under the policy, or the company brings a claim against one of its directors.

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Common issues that arise between insurer and insured in respect of D&O policies include disagreements over the definition of ‘director’ and ‘wrongful act’ in the policy, whether a claim was notified in time and in accordance with the notification provisions set out in the policy and whether any pre-existing exposure to claims was properly disclosed to the insurer before the inception of the policy. More recently, on recoveries of legal fees in Woodman and Hillman v AIG (2018) EWHC 358, directors’ significant specialist counsel outlay on defence costs was held by the High Court to be recoverable.

One area to watch in 2023 is litigation relating to D&O insurers attempting to limit their liability for covid-19-related liability claims. Points of contention could arise in claims made by shareholders against directors or officers for breaching their duties to the company or corporate mismanagement that led to insolvency during the pandemic. Shareholder claims can be brought under section 90 and section 90A Financial Services Markets Act 2000 for losses suffered as a result of a misleading statement or dishonest omissions in published information relating to securities (for section 90, misleading statements under the listing rules or in the prospectus; and for section 90A, a wider category of documents, including annual reports). While comparatively rare, section 206 Companies Act 2006 allows for shareholder derivative actions to be brought by shareholders against directors for negligence, breach of duty or breach of trust. Also, it remains to be seen how expanded sanctions against Russia may affect defending D&Os of potentially impacted companies in practice.

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Cyber Insurance

Coverage

What type of risks may be covered in cyber insurance policies?

The main heads of cover under a standard cyber policy are typically:

• network security and privacy liability;
• privacy breach response costs and security event costs; regulatory defence costs;
• cyber business interruption cover;
• data and software restoration; and
• cyber extortion.

In some cases, reputational risk cover can also be added, although this is difficult to quantify and capacity in this area is limited. New areas of cover are also being offered now on costs of liabilities to third parties, first-party expenses, regulatory investigations and fines, incident response costs and breach of privacy compensation.

The definition of security breach will generally include denial of service attacks, transmission or receipt of malware and viruses and unauthorised access or use.

However, the more comprehensive the insurance cover is, and therefore the more risks covered, the greater the cost. The decision as to which risks to cover will require significant consideration when an insured takes out a policy. There are major issues that arise on restrictive interpretations by insurers on cyber covers.

The General Data Protection Regulation (GDPR), an EU law that regulates data protection and privacy, allows data subjects to bring claims to recover damages for breach of statutory duty for distress caused by the unlawful misuse of private information by data controllers. In addition to a claim under the GDPR, it has been common for claimants to claim for misuse of private information and breach of confidence, in order to recover premiums for after the event insurance policies that allow recovery in publication and privacy proceedings. However, In Warren v DSG Retail Limited [2021] EWHC 2168 (QB), the High Court held that claims of breach of confidence and common law negligence could not be made in addition to a statutory claim under the Data Protection Act 1998 against a company that had suffered a cyberattack. The Court held that data controllers’ obligations to data subjects were already defined by statute, and it was therefore unnecessary for separate common law claims to be made.

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Litigation

What cyber insurance issues have been litigated?

While the past year has not produced cases of comparable gravitas to the cases in the cyber litigation sphere in 2021, 2022 has expanded on and refined some of the emerging themes in the attitude of English courts towards the relatively novel area of cyber litigation.

After the Supreme Court in its Lloyd v Google [2021] UKSC 50 ( Lloyd Judgment) decision dismissed the large representation action of claimants seeking damages for loss of control of personal data and by that preventing the opening of floodgates of claims against data controllers where no actual loss was suffered by the claimants, the prospect of group actions in the context of data breaches and cybersecurity suffered another blow in the recent

Bennett & others v Equifax Ltd [2022] EWHC 1487 (the Bennett Decision) decision. In the Bennet Decision, the Senior Master Fontaine made an obiter remark that there are ‘real concerns about the entitlement to compensation for claims with low value’ in the context of the proposed Group Litigation Order. While the Supreme Court in its Lloyd judgment encouraged the use of the representative action mechanism highlighting its convenience and flexibility, the actual situations where this mechanism could be used seem to be narrowing down. It is likely that claims in cyber litigation lending themselves to representative actions will continue arising and it remains to be seen whether that might change the current signalling of English courts of its reluctance towards methods of collective litigation.

Another interesting development in the area of cyber litigation was brought by XXX v Persons Unknown [2022] EWHC 2776 (the Decision) where the Court decided that retaining the anonymity of a company that has been a victim of a cyberattack is consistent with the European Convention of Human Rights and is a justified derogation from open justice especially in the circumstances where the Court is considering making a final order which may bring a litigation to an end.

The claimants suffered a loss of confidential and sensitive data by the defendants that demanded USUSD 6.8 million payment in exchange for decryption and non-disclosure of the downloaded information. In this case, the Court ruled that the nature of the work that is carried out by the claimant and the risk of stolen documents being accessed by malicious third parties on the Dark Web or otherwise if the identity of the claimant company was revealed was serious enough to justify the continuation of the anonymity order. Another factor that was considered persuasive was that the identity of the ransomware attack is not yet significantly in the public domain. The Court considered that disclosing the identity of the claimant would make the court the instrument of the harm that the defendants seek to impose upon the claimant. This case serves as an example where the courts are willing to depart from the established principles of open justice to minimise the extent of a data breach.

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Terrorism Insurance

Availability

Is insurance available in your jurisdiction for injury or damage caused by acts of terrorism and, if so, how does it generally apply?

Historically, losses caused by terrorist attacks have been excluded in most types of commercial insurance policies in England and Wales. In response, the UK government established Pool Re, a reinsurance scheme ultimately backed by the UK government that provides reinsurance cover to insurers who are members of the Pool Re scheme for property of business interruption losses caused by terrorism. All insurers who are members of the Pool Re scheme must offer terrorism cover to insureds that request commercial property cover; some insurers will include terrorism cover as standard, while some will charge an additional premium.

The scope of terrorism cover available from insurers therefore depends to a large extent on the reinsurance cover available to insurers from Pool Re. As such, terrorism cover in the United Kingdom tends to be limited to commercial property and business interruption policies where terrorism is the proximate causes of any losses. For example, if an act of terrorism caused a dam to burst, any third-party commercial property damage would be covered. As a general rule, policies do not cover personal injury caused by terrorism.

The scope of cover is limited to terrorist acts that take place within the United Kingdom, but excluding Northern Ireland, the Channel Islands or nuclear sites. The act that triggers cover must constitute an act of terrorism as defined by the Reinsurance (Acts of Terrorism) Act 1993, although insurers are at liberty to provide their own definition of terrorism in policy wordings, with many opting to use the definition in the Terrorism Act 2000.

As of April 2018, Pool Re extended its terrorism cover for contemplated potential future events to include material damage and business interruption caused by acts of remote digital interference where attacks and explosions are perpetrated in the future via cyber. The scope of the cover available is designed primarily to protect commercial property and will be offered as standard to policyholders buying terrorism insurance from a Pool Re member. Business interruption cover is designed to apply only to events occurring at a policyholder’s premises. It is likely that more and more areas of business interruption will be covered to deal with the new form of measures and countermeasures against terrorism, which lead to business losses.

The above is subject to specialist market offerings on political violence that include terrorism, so in addition to the general covers referred to above, there are covers available to protect against terrorism losses that do not involve damage to property, but these tend to be bespoke products.

Law stated - 25 April 2023

Update and Trends

Key developments of the past year

Are there any emerging trends or hot topics in insurance law in your jurisdiction?

In the summer of 2022, the Commercial Court (Mr Justice Butcher) handed down the three highly anticipated judgments in relation to the interpretation and application of Business Interruption claims covered by the Marsh Resilience form in the context of the covid-19 pandemic. The relevant cases were: Stonegate Pub Co Ltd v MS Amlin Corporate member Ltd ( Stonegate) ; Various Eateries Trading Ltd v Allianz Insurance Plc ( Various Eateries ); and Greggs Plc v Zurich Insurance Plc ( Greggs ). The three cases were brought separately but their key issues as well as the arguments made by the policyholders and the insurers were similar to the extent that the Court cross referred to the other cases in the judgments and handed down the judgment of these cases together. The Court has ruled in favour of the insurers on most of the key issues in relation to causation, additional increased costs of working (AICOW) and the significance of furlough schemes and business rates when determining indemnity.

The Court rejected the insurers’ argument that all the retailers’ claims are subject to one Single Business Interruption Loss with a limit of GBP 2.5 million as all the claims can be loosely related back to the initial covid-19 outbreak in Wuhan in November 2019. In Stonegate, the Court determined that there were two occurrences for the purposes of the policy, aggregating to a maximum recovery of two limits (each of GBP 2.5 million), one occurrence being the Prime Minister’s COVID-19 Statement on 16 March 2020 and the other occurrence being the government instructing the closure of retailers on 20 March 2020. In Greggs , although the cases are very similar, the wording for the policy diverges from Stonegate .

In Greggs’ aggregation case, Mr Justice Butcher rejected Zurich’s arguments that there was only one ‘single occurrence’ under the insurance policy. The Court held that there was a single occurrence from March 2020 until May 2020 followed by other separated occurrences based on major restrictions that took place over the course of 2020. The Court also held that regulations that merely continued existing restrictions and/or trivial changes are not enough to constitute a ‘new’ occurrent.

On the issue of causation, in Stonegate (valued by the insured at in excess of GBP 1 billion) the Court ruled that no claimed losses in England after 4 July 2020 were proximately caused by the covered events in policy as any subsequent policy response by the government was driven by the subsequent developments of the disease and the threat it posed from time to time. In Various Eateries , the Court held that losses from government actions occurring shortly after the policy has expired would be covered due to the government actions being likely caused by events occurring during the Policy period, having regards to the delay in obtaining covid-19 data and the 14-day infection period. As such, Various Eateries was allowed to claim business interruption loss from the government’s decision to announce the three-tier system on 12 October as the cases notified during the policy period were at least an equal proximate cause of the action. However, the losses from the second lockdown announced on 5 November 2020 would not be covered by the policy as the covid-19 cases most relevant to this announcement would have occurred significantly after the policy period terminated.

In Stonegate, in relation to the Additional Increased Cost of Working (AICOW), while the Court did not agree with the insurer’s argument that there is a single aggregate limit of GBP 15 million, the Court held that the AICOW limit only applied to costs incurred by Stonegate that did not affect its turnover calculations. Costs incurred that did affect the turnover would be subject to the GBP 2.5 million single business interruption loss cover.

Crucially, the Court ruled that the employment costs were reduced by the payment of the Coronavirus Job Retention Scheme and as such benefits received by the retailers from the Furlough Scheme or from the business rates being applied should be accounted for when indemnities are calculated.

While the three judgments handed down make it clear that a lot of the Court’s decisions turn on the specific policy wording and as such cannot be seen as guidelines on COVID-19 Business Interruption Claims, the general nature of the judgment being pro-insurer rather than pro-policy holder friendly as was the case in the FCA test case is a significant development in the Court’s signalling in relation to covid-19 claims that insurers and policyholders should be aware of.

Potentially, the most beneficial aspect of these decisions is the fact the UK courts are not prepared to accept the argument from the insureds that the covid-19 pandemic constituted a single event from early 2020 until the middle of 2021. Even though this inevitably leads to lengthier discussions over which factual elements should be considered as an ‘event’/’occurrence’ under the terms of the (re)insurance policies, this selective approach has the potential to significantly reduce the insurer’s exposure.

In addition to the significant progress and development of the case law to questions related to covid and business interruption, the Quadra Commodities SA v XL Insurance and Others [2022] EWHC 431 (Comm) ( Quadra case ) deserves attention.

In the Quadra case , the insured had purchased goods in Ukraine from Agroinvest Group. Following the Agroinvest Group fraud unveiled in February 2019, all the goods acquired by the insured had disappeared. The insured commenced proceeding in the High Court after the insurers denied the insurance claim under a marine cargo open-cover insurance policy. After the insured success in the High Court, the insurers appealed to the Court of Appeal, but on 21 April 2023, the Court of Appeal handed down the judgment upholding the High Court decision.

The Court of Appeal found ‘ample evidence’ that goods corresponding to the sale contracts and the warehouse receipts were physically present while stating that it was ‘integral to the fraud’ that the goods could be inspected. It was held by both the High Court and Court of Appeal that the evidence produced, in particular inspection reports, established that the insured had an insurable interest under the wide definition of ‘interest’ as per the Policy.

The Court of Appeal also held that the principle in Cumberland Bone should now be recognised as a principle in English law, meaning that even in the occasion that neither property nor risk in goods has passed to the buyer, the existence of payment or part-payment for the goods will give the buyer an insurable interest and such insurable interest ‘is not in any sense dependent upon the goods being ascertained or part of a sufficiently ascertained bulk’.

By upholding the High Court’s decision, the Court of Appeal provides further guidance on ‘insurable interest’ while also re-affirming the Court’s position that there is an insurable interest in similar situations. Most important, by confirming the applicability of the principle in Cumberland Bone , the Court of Appeal recognises that insureds can have an insurable interest in unascertained goods.

In the international sphere, it is of significance that decisions of the courts of England and Wales are a point of reference for Lex Mercatoria , international law and practice, and to highlight international market practice and meanings for the insurance industry. We have seen this in relation to covid-19, and more recently in the decision of the Superior Court of New Jersey Appellate Division decision in the case Merck and International Indemnity v ACE (et al) in relation to the correct interpretation of political violence terms in the insurance industry. Very importantly, this decision reiterates the special meanings of hostilities, warlike, war, terrorism and application of causation to political violence events versus non-violence-related cyber incidents.