- On 16 June 2023, the High Court handed down judgment in the above matter ( EWHC 1481 (Comm)), which involved members of chambers, Aidan Christie KC, Michael Davie KC, Martyn Naylor and Anna Hoffmann. The judgment considered the application of the analysis by the Supreme Court in the seminal case The FCA v Arch & Others  UKSC 1 (the “FCA Test Case”) regarding concurrent causation and disease clauses in the context ofpolicy wordings that were triggered by the disease being at the premises, rather than within a radius of the insured premises . Jacobs J concluded that the UKSC’s approach and concurrent causation analysis would also apply to such at the premises wordings.
- In the FCA Test Case, the UKSC held that in the context of radius clauses (which specify coverage for a specific radius, e.g. 25 miles), covered only cases of illness resulting from COVID-19 that occurred within the radius specified in the clause. In order to show that COVID-19 was the proximate cause of the BI losses, it was sufficient to prove that the interruption was a result of Government action taken in response to cases of disease which included at least one case of COVID-19 within the radius of the clause. (For a summary of the FCA Test Case, click here).
- The critical issue in the present case was whether clauses that provided insurance cover where it could be established that COVID-19 was “at the premises” (“ATP clauses”) should also adopt the “concurrent causation” analysis found to apply to the radius clauses in the FCA Test Case.
- The judgment concerned a number of preliminary issues arising out of claims made in six separate actions in respect of business interruption losses allegedly suffered by different policyholders as a result of Covid-19 and related national lockdowns. The Claimant in the lead action owns and operates the “Excel Centre” and brought claims against six insurers.
- Jacobs J confirmed that the UKSC causation analysis in the FCA Test Case applied to the ATP clauses (see ). The reasons for the decision were, in summary, as follows:
a. It was accepted by both sides that the physical coverage of radius clauses logically encompassed the premises themselves. There was therefore a clear “geographical link” between a radius clause and ATP clauses, as the width of the radius was interpreted as starting from a central point in the premises (see  to ).
b. At paragraph  of the FCA Test Case, the UKSC had noted that, in principle, the same causation analysis should apply to hybrid and prevention of access clauses. This reasoning was adopted in Corbin & King Ltd and Others v AXA Insurance UK Plc  EWHC 409 (Comm) by Cockerill J. These clauses essentially relate to clauses covering occurrences “in the vicinity of the premises” and did not have a specified physical area of coverage. They were therefore, in the Judge’s view, very similar to ATP clauses in terms of size and geography (see  and ).
c. The diseases covered by the ATP clauses and the radius clauses shared the same proclivity to become widespread and to call for action not solely responsive to cases within the radius or the premises. It could therefore be expected by insurers that individual cases of diseases of those types may combine to cause loss that would not have resulted from any individual case alone. Ultimately, therefore, it was not the existence of the radius which permitted that “wider area authority action” should be covered, but rather the nature of the diseases (see ).
d. On a proper interpretation of the clauses, the radius is essentially a line that has been drawn for the purposes of contractual certainty and should not, therefore impact on the appropriate approach to causation (see  and ).
e. In the FCA Test Case, the UKSC considered that a “fundamental objection” to the alternative “but for” and “weighing up” causation approaches, was that they set disease occurring outside the scope of the cover in competition with those occurring within its scope. This argument was equally applicable to ATP clauses (see  and ).
f. As observed in the FCA Test Case, it was important, for the purposes of construction to apply an approach that was clear and simple. The application of the “but for” test would give rise to anomalies which it would be difficult to explain rationally to a reasonable policyholder. In comparison the concurrent causation approach was straightforward and provided clarity (see ).
- The Judgment also dealt with the issue of causative potency of individual cases of Covid-19 and confirmed that cases in March 2020 could not be said to have caused lockdowns later in the autumn of that year. This confirmed the conclusions reached in the context of aggregation question by Butcher J in Stonegate Pub Company Ltd v MS Amlin Corporate Member Ltd & Ors  EWHC 2548 (Comm).
- Jacobs J also agreed with the arguments presented on behalf of some insurers with policies requiring the presence of a notifiable disease on the premises that such a trigger could only have occurred after Covid-19 had been made a notifiable disease in the relevant part of the UK, e.g. on 5 March 2020 in England (see  and ).
- As the decision may be appealed, it is not yet possible to determine the true extent of its significance. Further, at , Jacobs J referred to the potential application of the causation analysis to “vicinity” clauses and noted that this matter was likely to arise in other preliminary issues before him later this year. It will therefore be interesting to see how this develops, and how broadly the concurrent causation approach will be applied in future cases.
- Further, as observed by Jacobs J at , ATP clauses are on this analysis essentially heavily confined radius clauses, and the narrower the radius, the more difficult it will be to demonstrate that an occurrence took place within that area. Therefore, whilst the decision is, at first blush, a win for policyholders with ATP clauses, they may face evidential challenges further down the line.
Rachel Ansell KC and Katy Handley