Unipolsai Assicurazioni Spa v Covéa Insurance PLC
[2024] EWCA Civ 1110
Unipolsai Assicurazioni SpA v Covea Insurance PLC
9 February 2024
[2024] EWHC 253 (Comm)
High Court
Two insurance companies argued about paying for business losses caused by COVID-19. The judge decided COVID-19 was one big event ('catastrophe') that caused the losses, and clarified how the time limits in their contracts should be applied. The time limits only apply to when the losses started, not how long the business stayed closed.
Key Facts
- •Two appeals under s.69 of the Arbitration Act 1996 concerning Partial Final Arbitration Awards.
- •Appeals relate to indemnity claims for business interruption losses caused by the Covid-19 pandemic under property catastrophe excess of loss reinsurance contracts.
- •Key issues: whether Covid-19 losses arose from one catastrophe and the effect of 'Hours Clauses' limiting indemnity to losses within a specific period.
- •Covéa Award found Covid-19 losses arose from one catastrophe and the 'Hours Clause' didn't limit indemnity to the closure period.
- •Markel Award found Covid-19 losses arose from one catastrophe but the 'Hours Clause' did limit indemnity to the closure period.
Legal Principles
Section 69 Arbitration Act 1996 appeals: The issue of law must arise out of the award; deference is given to the tribunal's decision where its expertise is relevant; interference is only justified if the tribunal erred in law or reached an unreasonable conclusion on the facts; minor refinements to the issue are allowed; only documents referred to in the award are admissible; respondent can uphold the award on unexpressed grounds only if based on law.
Arbitration Act 1996, s.69; Silverburn Shipping; Sylvia Shipping; Cottonex Anstalt; CTI Group Inc.
Contractual interpretation: objective approach based on what a reasonable person would understand, considering available background knowledge; subjective intentions are irrelevant.
The FCA Test Case
Construction of aggregation clauses: balanced approach, neither narrow nor broad; perspective is from an informed observer in the insured's position.
Stonegate; Spire Healthcare; Kuwait Airways Corporation
Admissible materials: background knowledge reasonably available to parties at the time of contract (excluding negotiations and subjective intent). Market history and events leading to wording changes are admissible, particularly for market standard forms.
Investors Compensation Scheme; Blackwell v Gerling; Netherlands v Deutsche Bank; Global Maritime Investments; Charter Re Insurance
Outcomes
Appeals against the finding that Covid-19 losses arose from one catastrophe are dismissed.
The word 'catastrophe' is not limited to events causing physical damage; the market practice and terms of the reinsurances support this; the Covid-19 outbreak met the criteria of a catastrophe, being a coherent, identifiable event with significant adverse effects.
UnipolRe's appeal against the Covéa Award's interpretation of the 'Hours Clause' is dismissed.
The 'Hours Clause' defines the duration of a loss occurrence, not individual losses; individual losses occur when the peril strikes, affecting the insured premises; a consistent approach is needed for damage and non-damage business interruption.
Markel's appeal against the Markel Award's interpretation of the 'Hours Clause' is allowed.
The Markel 'Hours Clause' focuses on the duration of the catastrophe and individual losses occurring within the defined periods; the 'day-by-day' interpretation is rejected in favor of when the peril affecting the premises occurs.
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