Business interruption insurance (BII) update: Covid-19 not classed as ‘a plague’ for the purposes of insurance cover

Rockliffe Hall, a 5-star luxury hotel and golf course in County Durham, like many others, suffered significant financial losses as a result of the pandemic. The hotel made a claim on their business interruption insurance but it was refused.

Rockliffe Hall’s policy had very specific wording. Whilst it did cover business interruption losses resulting from “infectious disease outbreaks”, the policy expressly defined “infectious diseases” as a prescribed list of 34 diseases. The list included things like measles, chicken pox and plague, but was written pre-pandemic in 2019 so did not refer to Covid-19.

Travelers successfully argued that, because the list was closed and exhaustive, the policy only covered business losses arising from the 34 specific diseases on the list – other diseases would not be covered.

Rockliffe Hall sought to argue that ‘plague’ was an all-encompassing terms that Covid-19 fell within. However the judge held that ‘plague’ was obviously meant to refer to a specific disease caused by Yersinia pestis bacteria - i.e. the bubonic, pneumonic or septicaemic plague. Because of this, Rockliffe Hall’s insurance did not cover losses arising from Covid-19 and Travelers were right to reject the claim.

What does this mean for businesses?

Businesses should be cautious when their business interruption policy contains a closed list of trigger events which entitle them to a pay-out.

Whilst the Supreme Court decision in the BII test case was a welcome one for business, Courts will still look at the exact wording of the policy. In this instance it meant that the hotel could not claim if losses flowed from anything other than the specific list of causes in their policy.

The case shows the need to carefully consider policy wording if a claim is rejected. Businesses should take advice before embarking on litigation and our team can assist with this.