“Moving the Goalposts”: Important Victory for Policyholders in Corbin & King & Others vs AXA
In our first article, published in August 2021, “The Supreme Court has Spoken: Business Interruption and the COVID-19 Pandemic” we set out some of the unresolved issues still facing policyholders following the Supreme Court’s judgment in the FCA’s business interruption test case (the “FCA Test Case”) .
One such issue was the availability of cover under non-damage prevention of access clauses. However, the recent decision of Corbin & King Limited & Others v Axa Insurance UK Plc , where the Court found in favour of cover under one such clause, now provides important (and much needed) clarity to policyholders and their brokers in respect of claims under such clauses.
The FCA Test Case
A common type of non-damage prevention of access clause responds to business interruption losses suffered by policyholders where access to their premises is restricted or hindered by an authority/body in response to a “danger” or “emergency” within a certain radius of the policyholder’s premises. In the context of COVID-19 business interruption losses, a market-wide difference of opinion between insurers and their policyholders arose: does the presence of COVID-19 constitute such a “danger” or “emergency”?
In the FCA Test Case, the Divisional Court found that the majority of such clauses only provide cover for local dangers/emergencies (the paradigm examples being gas leaks, or bomb scares) and that policyholders would have to show that it was a local outbreak of COVID-19 that directly led to a business’ interruption, not the consequences of a wider national pandemic. The Court acknowledged that this was likely to be an insurmountable barrier to cover for most policyholders given the national character of the COVID-19 pandemic.
Those findings of the Divisional Court were not appealed by the FCA to the Supreme Court. However, certain findings made by the Supreme Court on the question of causation caused many commentators to question whether, had such an appeal been brought to the Supreme Court, the Supreme Court might have overturned the Divisional Court’s decision on non-damage prevention of access clauses and found in favour of cover.
In particular, the Divisional Court’s findings sat uncomfortably with the Supreme Court’s finding that, where there are concurrent causes of business interruption loss, where one or more of those causes are (i) insured (such as a “local” case of COVID-19 within a specified radius of a business’ premises); and (ii) uninsured (such as a “non-local” case of COVID-19 outside of that radius), unless the latter is specifically excluded, the entirety of the insured’s loss is covered. It was, for many policyholder advocates, hard to reconcile that finding with the Divisional Court’s view that, once a contagious disease spreads (as contagious diseases are prone to doing) beyond any geographical radius specified by the policy, a non-damage denial of access insuring clause ceases to be triggered, since the peril has morphed from a “local” one, contained within the policy’s geographical limits, to something broader to which the policy was not intended to respond.
Importantly, the above scepticism expressed following the FCA Test Case was later given judicial support. A view was advanced by Lord Mance (the former Deputy President of the Supreme Court) in an arbitration award (that was, unusually, published) in respect of a claim against China Taiping, where he said the following:
“I therefore doubt whether the Divisional Court could or would have approached the matter as it did in paragraphs 466 and 467 had it had the benefit of the Supreme Court’s analysis”.
For many policyholder advocates, therefore, there remained a possibility (notwithstanding the Divisional Court’s decision in the FCA Test Case) that the position might subsequently be revisited by the Court in policyholders’ favour. The case of Corbin & King provided the Court with such an opportunity.
Corbin & King & Others v AXA
The Claimants in Corbin & King held business interruption insurance which covered them for business interruption loss where access to an insured premises is restricted or hindered arising directly from:
“the actions taken by police or any other statutory body in response to danger or disturbance at the premises or within 1 mile radius.”
The Claimants argued that the closures to their premises were due to the presence of COVID-19 within the requisite 1 mile, and that this constituted a “danger” envisaged by their policy to which it should respond. By application of the Supreme Court’s reasoning described above, that was so, the Claimants argued, despite the presence of many thousands of cases beyond the policy’s 1 mile limit. Although the Government’s response to COVID-19 was in response to all such cases (i.e. those within 1 mile of the Claimants’ premises, and the thousands outside of it), it was in part due to the cases of COVID-19 within the 1 mile policy radius, those cases were therefore a proximate cause of the Claimants’ loss, and consequently the AXA policy should respond to them, absent any exclusion for any other concurrent causes of the Claimants’ loss.
AXA, on the other hand, relied upon the Divisional Court’s analysis in the FCA Test Case, and argued that the Supreme Court’s analysis in relation to causation had no application to the question of whether or not its non-damage denial of access clause was triggered in principle. Corbin & King, AXA argued, was affected by the consequences of a national pandemic, not a local “danger” or “disturbance”, on which basis the AXA policy’s insuring clause was simply not triggered.
Before ruling on the issue of whether a “danger” had arisen, Mrs Justice Cockerill first had to decide whether she was bound by the Divisional Court’s reasoning in the FCA Test Case. She concluded that she was not, for two reasons:
- First, the clause under consideration in the AXA policy was sufficiently different to those considered in the FCA Test Case that Mrs Justice Cockerill considered that she was entitled to form her own view on it; and
- Second, the arguments before the Divisional Court in the FCA Test Case were “subtly but significantly different” from the arguments heard by Mrs Justice Cockerill on the relevant issues. The consequence of that, Mrs Justice Cockerill held, was that the relevant issues had not been “squarely raised and decided” by the Divisional Court, and that the subsequent findings of the Supreme Court had “moved the goalposts”, such that she was not bound by the Divisional Court’s earlier decision.
Having formed the view that she was not bound by the Divisional Court in the FCA Test Case, Mrs Justice Cockerill went on to find for the policyholder Claimants and held that COVID-19 was a “danger” that had occurred within 1 mile of the Claimants’ premises. That “danger” had in part led to the Government’s COVID-19 regulations which in turn caused the closure of the businesses, and their loss. This was despite the presence of other, uninsured (but not excluded), dangers which might also have contributed to Government’s reaction, such as the presence of COVID-19 cases outside of the AXA policy’s 1 mile radius.
In short, the non-damage denial of access clause was triggered.
A second important question arose in Corbin & King – could each of the Claimants recover a separate sub-limit of indemnity in relation to business interruption losses arising at each insured premises, or should the losses suffered by all Claimants be aggregated such that a single aggregate limit for all premises applied under the AXA policy?
Again, finding for the policyholders, Mrs Justice Cockerill held that each insured premises was entitled to claim against its own sub-limit. This was for two reasons:
- First, the AXA policy was a composite policy and each insured entity was entitled to bring its own claim under the AXA policy in respect of its own insured premises; and
- Second, each insured premises existed in separate locations, and was subject to the adverse effects of a separate peril specific to each premises (i.e. its closure by virtue of a Government response to cases of COVID-19 within a mile of it). Whilst the Government’s regulations were common to all premises insured under the AXA policy, the peril itself – a premises’ closure – was specific to each premises, and closures by multiple premises amounted to multiple separate incidents which should not be aggregated.
Each premises, therefore, was entitled to its own £250,000 sub-limit under the AXA policy.
What Next for Policyholders?
The Corbin & King decision is an important one for policyholders whose BI policies against which COVID-19 BI claims might exist contain similar language to that described above. Where claims have historically been declined or restricted by Insurers, either on the basis of (a) the Divisional Court’s earlier analysis on non-damage denial of access clauses; or (b) the application of a single sub-limit of liability for claims in respect of multiple premises insured under a single policy, policyholders may wish to take legal advice on the extent to which their claims should now be revisited.
  EWHC 409 (Comm).
This article represents the views of Indemnity Legal and should not be taken as legal advice, nor relied upon as such. Should you require legal advice, please don’t hesitate to get in touch with us.
14 March 2022