Insurance Law Monthly
Business interruption insurance: pandemic claims
The Supreme Court has, in The Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1 both upheld and extended the decision of the Divisional Court, [2020] Lloyd’s Rep IR 527, and has thereby accepted that extensions conferring business interruption cover for losses caused by infectious disease and government action are applicable to the Covid-19 pandemic. Insurance cover for business interruption losses is typically triggered by material damage that gives rise to the financial loss.
Although it has been suggested in some US courts that the Covid-19 virus might cause material damage to property, the definition
of damage – physical alteration to the integrity of property – removes any serious possibility of the argument’s success.
The extensions were thus crucial to recovery. Lords Hamblen and Leggat, with whom Lord Reed agreed, delivered the main judgment.
A separate judgment was delivered by Lord Briggs, with whom Lord Hodge agreed; this was technically for the most part a concurring
judgment but there were some points of difference in the reasoning.