On 15th January 2021 the UK’s Supreme Court handed down its decision Financial Conduct Authority (Appellant) -v- Arch Insurance (UK) Ltd and others (Respondents) [2020] EWHC Comm 2448. The Supreme Court rejected all of the Insurer’s appeals and it allowed the appeals by the FCA.

The Supreme Court had considered a number of business interruption clauses which provided insurance cover for business interruption loss caused by occurrence of a notifiable disease within a radius of 25 miles from their premises. The Supreme Court interpreted the said clauses and clarified that each case of COVID-19 is a separate occurrence and that the business interruption losses shall be covered only if they happened within the radius of 25 miles from the insured premises.

In relation to the prevention of access/hybrid clauses where the insured business is unable to use its premises because of restrictions imposed by the government, which is attributed to an occurrence of any human infectious or human contagious disease, an outbreak of which must be notified to the local authority. The Supreme Court found that these types of clauses contains a series of elements which must be satisfied to trigger the insurer’s obligation to indemnify the policyholder against loss. In order to trigger the Insurer���s liability these elements shall occur in a causal sequence.

Furthermore, the Supreme Court considered that “prevention of access” has the meaning that a total closure of a business is not necessary and a partial closure suffice. The example of the restaurant which offers a takeaway service illustrates the commercial sense of the Supreme Court’s interpretation, “The distinction drawn by Arch, and accepted by the court below, between continuing to operate such a service (where it is said that there would be no prevention of access or inability to use the premises) and starting a new takeaway service after closing the restaurant for dining is an unsatisfactory and arbitrary distinction. It is also illogical. If the premises can be put to such use, then it can be said that there is an ability to use them and that access to the premises for the purposes of carrying on the policyholder’s business is not prevented. A more realistic view is that there is prevention of access to (and inability to use) a discrete part of the premises, namely the dining area of the restaurant, and prevention of access to (and inability to use) the premises for the discrete business activity of providing a dining in service.”

The Supreme Court’s view on different aspects of the case, such as the interpretation of the word “restrictions imposed” according to which there is no need for the restriction to have the force of law, as it could include instructions given by public authority with binding effect. In the same direction the Supreme Court held that the causation required in relation to disease clauses, that it is sufficient for the policyholder to show that a government measure was a result of one case within the radius of 25 miles from the insured premises. In relation to the prevention of access/hybrid clauses the court held that the losses are covered if they resulted from the causal sequence explained above.

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