High Court clarifies key issues in business interruption insurance policies amidst COVID-19 in Gatwick Investment Limited & Ors v Liberty Mutual Insurance Europe SE

Citation: [2024] EWHC 124 (Comm)
Judgment on

Introduction

In the high-profile case of Gatwick Investment Limited & Ors v Liberty Mutual Insurance Europe SE and related claims, the High Court of Justice grappled with several intricate issues rooted in business interruption insurance policies. Central to the dispute was the interpretation of specific policy components in the wake of the unprecedented COVID-19 pandemic. The court delivered an extensive judgment, elucidating the application of legal principles to a set of preliminary issues that are pivotal to the determination of coverage under the respective policies.

Key Facts

The case involved various claimants, including hotel, entertainment, and retail owners, who sought indemnities under their business interruption insurance policies following government-imposed restrictions due to COVID-19. These restrictions aimed to control the spread of the virus effectively stopped or limited the operations of the claimants’ businesses, leading to significant losses. The crux of the disputes centered around the interpretation of clauses regarding the “action by the Police or any other Statutory Authority,” the application of policy limits, and the treatment of government grants received under the Coronavirus Job Retention Scheme (CJRS), commonly known as furlough payments.

The court applied established principles of contract interpretation, stating that the objective is to discern what a reasonable person, privy to the context known to the parties, would have understood the terms to mean. In this vein, the court followed earlier decisions by other Commercial Court judges where the issues presented were materially identical, highlighting the importance of judicial comity and consistency in applying legal principles.

The judgment addressed the meaning of “action by the Police or any other Statutory Authority,” where it was determined that the government’s lockdown regulations fell within the ambit of actions by a “Statutory Authority.” The court also clarified the interpretation of policy limits, finding that each claim under the composite policies of the claimants had access to the full limit, rather than an aggregated cap for all insureds. Furthermore, the ruling delineated that business interruption indemnity limits were to be applied based on “any one occurrence,” as dictated by the defined terms of the respective policies, rather than on an annual aggregate basis unless expressly stated otherwise.

Regarding the CJRS payments, the court decided that these amounts should indeed be accounted for under the policies’ “savings” clauses, aligning with the principle that insurance contracts are meant to indemnify not overindemnify. This decision affirmed that these payments reduced the costs to the business covered by the indemnity.

Outcomes

The ruling translated into several specific outcomes for the policies in focus:

  • “Action by any other Statutory Authority” within policy definitions includes government-imposed restrictions due to COVID-19.
  • The business interruption indemnity limit applies separately to each insured under composite policies and is not to be understood as an aggregated limit for all insureds.
  • Indemnification under the policies is to be based on “any one occurrence” rather than an aggregate limit for the policy period, considering the number of occurrences.
  • Payments made to claimants under the CJRS are to be accounted for, impacting the indemnity amount due under the policies’ savings provisions.

Conclusion

The High Court’s decision in Gatwick Investment Limited & Ors v Liberty Mutual Insurance Europe SE offers a detailed examination of the legal principles shaping business interruption insurance. The judgment reinforces the objective approach to interpreting policy language, the critical assessment of aggregate versus per-occurrence limits, and the application of indemnity principles to financial supports such as the CJRS payments. As businesses and insurers navigate the lasting implications of the pandemic, the findings in this case provide clarity and legal precedent for similar disputes regarding interruption insurance claims.

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