Roger Franklin, Head of Insurance Litigation and London Solicitors Litigation Association (LSLA) committee member explains why the industry needs to take heed of the potential impact of a key COVID-19 decision by insurer Axa in an article recently published in Emerging Risks magazine.

Just when insurers thought that the scope of their exposure to Covid-19 business interruption losses had crystallised, Axa’s decision not to appeal the recent judgment in Corbin & King v Axa has opened up the possibility of more claims, with other significant issues looming on the horizon.

In Corbin & King the claimants issued claims against Axa under the non-damage denial of access (NDDA) cover in a policy of insurance which provided business interruption cover from November 2019 to November 2020. Corbin & King’s losses arose from the enforced closure of their restaurants and cafés as a result of the regulations passed in response to the pandemic.

Axa, like many other insurers, initially rejected such claims based upon the reasoning of the Divisional Court in the test case FCA v Arch Insurance, which held that although the term “danger” was capable of including a contagious disease, the business interruption was caused by the regulations which were introduced to combat the national pandemic. Thus the proximate cause of the losses was the national pandemic rather than any case or cases of Covid-19 in any particular radius.

That logic was thrown into doubt by the Supreme Court’s reasoning on causation[3], which found that each case of Covid-19 was a concurrent cause of the restrictions, and therefore, even if there was only one case of Covid-19 in the relevant radius, there was coverage.

The judge in Corbin & King concluded that the Divisional Court judgment did not present an obstacle to judgment in favour of the Claimants. The Supreme Court’s approach to causation, although not expressly directed to NDDA clauses, had “opened up the field for a different iteration of the construction argument, which approximates to the one adopted by the Supreme Court on disease clauses.” On that basis, she found for the Claimants…

You can read Roger’s full article on the Emerging Risks website.

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