In this Court of Appeal judgment of 6 September 2024 in London International Exhibition Centre PLC v Allianz Insurance PLC and Others the court considered what constituted the insured peril occurring “at the premises” of the insured.
The relevant policies contained “at the premises” infectious disease extension wordings.
It had been agreed or assumed that in each case the insured would be able to prove that at least one person with Covid-19 was present at the insureds’ premises between the date when Covid-19 became a notifiable disease and the closure of the premises because of government action.
The common causation issues on appeal were as follows:
Common Cause
- What are the causation requirements for the ‘at the premises’ (ATP) disease/hybrid cover in each appeal on the correct construction of each policy? In particular, in order to show that loss resulting from interruption of or interference with each insured’s business at the premises was caused by closure or restrictions of the insured premises or other government measure caused by an occurrence or manifestation or suffering of COVID-19 at the insured premises:
- Is it sufficient to prove that the relevant measure was made or continued in response to cases of COVID-19 which included at least one case of COVID-19 at the insured premises?
[The court answered ‘Yes’]
- Is it necessary to prove that the occurrence or manifestation of COVID-19 at the insured premises was a distinct effective cause of the relevant measure, in the sense of it being the fact of disease having occurred or manifested at the Premises to which the authority was responding in ordering or advising that the Premises be closed?
[The court’s answer was ‘No’]
- Is it necessary to prove that the occurrence or manifestation of disease at the Premises was a ‘but for’ cause or a necessary and/or sufficient cause of the relevant measure?
[The court’s answer was ‘No’]
- Is it necessary to prove that the occurrence or manifestation of disease at the Premises was reported to or otherwise known about by the authority prior to the order or advice for closure etc. of the Premises?
[The court’s answer was ‘No’]
- Is it necessary to prove that the occurrence of COVID-19 at the premises was something the government had information about and was taken into account by the government prior to the date of government action?”
[The court’s answer was ‘No’]
The court said that the nature of the insured peril will inform the nature of the causation test which the parties will be taken to have agreed to.
The nature of the notifiable diseases indicated that the cover contemplated a scenario of widespread infection and:
“Accordingly, if the parties had applied their minds to the circumstances in which the insured premises were likely to be closed by a relevant authority as a result of an occurrence of disease at the premises, they would have contemplated that closures or restrictions imposed by the authority in such cases would be unlikely to be a response only to the occurrence of the disease at the insured premises. Rather they would be imposed in response to the outbreak as a whole over the relevant area, whether local or national. Indeed, the worse and more widespread the outbreak of the disease, the more likely it would be that such restrictions would be imposed. If the disease clauses were to have meaningful content, therefore, the parties must have intended that there would be cover in such circumstances.”
The court went on to hold that the applicable test of causation was in essence the same as that adopted by the Supreme Court in the 2021 FCA test case:
“These considerations demonstrate, in our judgment, that the parties cannot have intended a conventional ‘but for’ approach to causation to apply. In the circumstances in which the insured peril was likely to arise, and cover under the disease clause would be most needed, it would in general be difficult or impossible for the policyholder to prove that the restrictions would not have been imposed ‘but for’ the occurrence of the disease at the insured premises. Accordingly the parties must have intended that the causation requirement would be satisfied if the occurrence at the premises was one of a number of causes of the closure (or, in the case of a ‘pure’ disease clause, of the BI losses suffered as a result of the disease). Moreover, it would not have mattered to the parties whether the number of other causes was large or small. Indeed, the larger the number, the more likely it was that restrictions would be imposed and the cover would be needed.”
The court said that although they had based their conclusion on the language and context of the “at the premises” clauses in the policies and the presumed common intention of the parties, rather than on the Supreme Court’s interpretation of the radius clauses, the court agreed with the Supreme Court’s conclusion.
Any differences between radius and “at the premises” clauses did not materially affect the nature of the causal link which had to be proved except that in the case of “at the premises” clauses the occurrence of the disease must be at the premises themselves and not within the specified distance from them.
The Court of Appeal went on the hold that it was unnecessary for the infection at the premises to have been reported to or known about by the relevant authorities. Lockdown restrictions responded to all cases whether known, unknown, reported or unreported.
An insured had to show an instance of infection at the insured premises during the relevant “qualifying period” for cover to be engaged.
The judgment may be further appealed to the Supreme Court. Covid-19 litigation in South Africa is largely done and dusted with some outlying complex large quantum arbitrations and high courts cases still to be resolved. And terms of contract disputes specific to the narrow facts of the claims.
The irony is that the court applied what the parties “must have intended” in regard to the insurance of a widespread outbreak of the disease. In fact, insurers asserted that no one at the time of insuring the risks contemplated anything except isolated events at the premises.