In this October 2022 judgment, the English high court found that the cover for Additional Increased Cost of Working (AICW) was limited to those costs incurred by the insured that were not “economic” Increased Cost of Working (ICW). The costs are economic if the increased costs and expenses have the effect of diminishing or avoiding Reduction in Turnover.  

The insured argued that the AICW sub-limit would act as a “top-up” cover once ICW is exhausted. The insurer successfully argued that the AICW sub-limit was only available for amounts which did not fall within the definition of ICW and was not available in respect of extra costs and expenses to the extent that they diminished or avoided reduction in turnover.

ICW and AICW are mutually exclusive. AICW cover is only available for expenditure which is not “economic”. That is usually expressly provided for in the policy because the definition of AICW says that it “means expenditure (other than Increased Cost of Working) reasonably incurred….”

The court held that the words “other than Increased Cost of Working” in the definition of AICW naturally meant “other than falling within the definition of Increased Cost of Working”.  The words did not say nor could they be read as saying “other than recovered as ICW”. The court said that was also consistent with the way in which AICW cover normally works and is expected to work.

The parties would not expect the AICW cover, which is comparatively cheap, to respond simply because the limit for ICW is exhausted. ICW itself is recoverable instead in the Reduction of Turnover which it avoids and is included as part of the limit per Single Business Interruption Loss (SBIL).