The extent to which insurance might help landlords and tenants through the pandemic remains very much in the spotlight as both parties scrutinise insurance policies to see if claims can be made. We previously wrote about the Supreme Court’s decision in favour of policy holders and following this case, there has been another decision on the interpretation of an insurance policy in the Newcastle Circuit Commercial Court (Rockcliffe Hall Ltd v Travelers Insurance Company Ltd).
The five star Rockliffe Hall in Darlington has been unsuccessful in its claim for losses of £250,000 under its business interruption insurance, having been forced to close due to the pandemic. The case turned on the following wording included in the hotel’s cover (that ran from July 2019, so before COVID-19 had been heard of) for loss arising from:
"1. Infectious Disease manifested by any person whilst at the Business Premises which results in closure of the whole or part of the Business Premises by the order of an appropriate competent authority.
2. An outbreak of Infectious Disease within 10 miles of the Business Premises."
The term "Infectious Disease" was defined by means of a list of specified diseases. Although COVID-19 was not among them (not having been known to the parties when the policy was taken out), there was reference to “plague” which the hotel argued could mean either a bacterial disease or an infectious disease with a high mortality rate, epidemic or pandemic. Rather stretching interpretation, it also tried to bring COVID-19 within the terms of the policy on the basis that the list included diseases which were capable of or likely to be caused by COVID-19. Relying on the Supreme Court’s judgment in Arch, it said that a disease should be included if bore a reasonable similarity to the diseases listed. This arose in Arch in the context of the definition of “Notifiable Disease” as defined (in the policies under review) by reference to an externally maintained list regularly updated by the government.
The insurance company applied for summary judgment. This is granted where it can be shown that the other side has no real prospect of success and that there is no other compelling reason for a trial. Granting the application, the judge highlighted that the definition of “Infectious Disease” began with the words “means”, as opposed to “includes” which might have opened the door to cover for diseases not specified. The context of the clause was such that “plague” could not be given the broader interpretation as it was obviously intended to refer to a specific disease caused by Yersinia pestis bacteria. The judge also distinguished this case from Arch because in this case, the list of diseases was static, referring to diseases known to the parties when the policy was taken out.
As the Supreme Court stressed in Arch, policy interpretation is going to be key in cases such as this.
"The courts must apply the ordinary principles which apply to construction of contracts regardless of the circumstances of this pandemic," Judge Cockerill in Rockcliffe Hall Ltd v Travelers Insurance Company Ltd