Racing authorities demonstrated competence in handling COVID-related claims, according to a court ruling.
High Court Rules in Favour of Bath Racecourse in Business Interruption Insurance Dispute
In a significant ruling, the High Court in London has sided with Bath Racecourse in a business interruption insurance litigation against its insurers. The case, Bath Racecourse and Others v Liberty Mutual Insurance Europe and Others, has brought clarity to the so-called "any one loss" rule in the context of pandemic-related business interruption claims.
The "any one loss" rule determines how multiple losses or claims are aggregated and treated under insurance policies for the purpose of calculating indemnity. In this case, the court supported the claimants' argument that various disruptions could be aggregated as "any one loss" under the policy, favouring the policyholders.
The ruling concerns the denial of access extension to the Business Interruption (BI) policies of the claimants, triggered by actions taken by the British Horseracing Authority (BHA) and the Greyhound Board of Great Britain (GBGB) in response to the Covid-19 pandemic. The court distinguished between different regulatory actions, including instructions by the BHA or GBGB and government regulations, and noted that each materially distinct restriction could constitute a new "trigger" for cover.
The policy includes a denial of access extension that applies where access to premises is prevented or hindered by "action by the police authority and/or the government or any local government body or any other competent authority" in response to danger or disturbance within a one-mile radius. The court held that the BHA and GBGB, despite being private companies, are considered competent authorities for the purposes of the policy.
This interpretation is crucial in pandemic-related business interruption claims because it affects the length and aggregation of insured losses, whether insurers can deduct furlough payments from claims, and the general quantum of loss recoverable by the insured. The court drew on the reasoning of Mr Justice Butcher in Stonegate Pub Co v MS Amlin Corporate Member [2022], in which individual closures were found to give rise to losses rather than the general cause of the pandemic.
The insurers attempted to argue that 'competent authority' should be read in the context of the other bodies listed (the police and government), but the judge found this line of reasoning unconvincing. Instead, the judge defined a 'competent authority' as a body with power and a role in the relevant context that goes beyond that of ordinary citizens, possessing the power to make decisions and enforce obedience or compliance.
The court sided largely with the claimants, accepting a granular approach to define each cancelled race meeting or materially different restriction as a separate insured loss. This means that the insurer would treat the numerous business interruptions caused by the pandemic as a single event or loss rather than multiple separate events, expanding coverage and indemnity for the claimants.
The insurers favoured a broader view, suggesting that losses should be grouped by reference to major regulatory measures such as the March and November lockdowns. However, the court's ruling supports a more detailed and nuanced approach, taking into account the specific circumstances of each disruption.
The case is part of a wave of pandemic-related insurance litigation following the Supreme Court ruling in FCA v Arch Insurance (UK) [2021]. Permission to appeal on the issue of the treatment of furlough payments has already been granted by the Supreme Court.
Stewarts' James Breese, representing Bath Racecourse, commented on the judgment, welcoming the clarification that businesses with multiple premises may have their own separate limits and sub-limits of indemnity. The claimants are seeking indemnity under a composite material damage and BI policy issued for the calendar year 2020.
In the litigation, the claimants were represented by Adam Kramer KC and William Day of 3 Verulam Buildings, and the defendants were represented by David Scorey KC and David Walsh of Essex Court Chambers. The ruling marks a significant victory for Bath Racecourse and other policyholders in similar situations, providing much-needed clarity in the interpretation of business interruption insurance policies during prolonged disruptions, such as the Covid-19 pandemic.
References:
- Bath Racecourse and Others v Liberty Mutual Insurance Europe and Others [2023] EWHC 567 (TCC)
- Stonegate Pub Co v MS Amlin Corporate Member [2022] EWHC 2817 (Comm)
- [FCA v Arch Insurance (UK) Ltd [2021] UKSC 1] (https://www.bailii.org/uk/cases/UKSC/2021/1.html)
- The ruling in the Bath Racecourse and Others v Liberty Mutual Insurance Europe and Others case has given light to the impact of the 'any one loss' rule in the finance sector, specifically in business interruption insurance.
- The judgement highlights the importance of this case in the industry, as it sets a precedent for how pandemics could be handled in future business interruption insurance claims, thereby influencing the business world significantly.
