Business Interruption Insurance

Business Interruption Insurance

Allianz Hotel Policy Test Case: Court to hear arguments in relation to business interruption insurance policy terms triggered by an occurrence of Covid-19 “At the Premises.”

Kent Carty Solicitors LLP will commence at trial in a test case on the interpretation of the Allianz Plc business policy terms on behalf of their client Marlin Hotel Dublin on the 13th of June next in a business interruption insurance claim for losses suffered due to government-ordered closures of the hotel during the Covid-19 pandemic.

The test case is one of a series of cases that have already been taken by policy holders with business interruption cover provided by other insurers such as FBD, AXA and RSA, which are the subject of several judgements of the Irish Commercial Court.

Business Interruption Clauses are typically an extension to property damage policies which respond to property damage such as a fire at a hotel. However, insurers regularly agree non-damage extensions for events such as disease and prevention of access which are the subject of the Marlin case. The issue for determination in the Marlin case is the interpretation of the Allianz Business Interruption Extensions for “Notifiable Disease” or “Prevention of Access” at the Property or in its immediate Vicinity.

Allianz refused Marlin’s application for an indemnity and the restrictive  interpretation of the policy wording, was challenged by Kent Carty solicitors on behalf of its client. Allianz ultimately acceded to Kent Carty’s request on behalf of its client that the matter be treated as a test case so that a ruling could be given for the benefit of all Policyholders.

During the course of the legal submissions Allianz conceded that it would not rely on an arbitration clause containing a strict 12-month time limit in the challenge. It is unclear whether Allianz will extend such indulgence to other policy holders in the event that Marlin is ultimately successful. It is understood that there are scores of policy holders who have been affected by declinature of similar business interruption claims and the case will have significant ramifications for policy holders and the insurance market in general.

Marlin argues that its position is clearly distinguishable from the position of the Devlin Hotel – which was recently unsuccessful in its claim which was pursued as a test case on the RSA policy terms – and that the correct test that should be applied under the Allianz policy wording is that one or more incidences of the disease “occurred” at the premises or its vicinity during the relevant periods. This  can evidently be distinguished from the Devlin Hotel case where the hotel was not able to establish there had been a “manifestation” of Covid-19 at the Hotel. Coverage within the vicinity or at a specified radius can also apply to “At the Premises” clauses. Legal submissions were made by Kent Carty who have instructed Martin Hayden SC and Martin Canny BL for the trial.

Importantly, the Commercial Court has accepted that the matter is one which is appropriate for determination as a test case. Legal argument will be made on proximate causation to show that Government orders to close the premises were proximately caused by “occurrences” of “diseases” “at the premises.” Allianz contend the restriction of access to the hotel must be directly caused by the occurrence of notifiable disease at the premises. By contrast Marlin submit there is no phrase “directly caused by” in the Policy and it can rely on the case law of the Irish Commercial Court and the Financial Conduct Authority v. Arch test case of the UK Supreme Court. Marlin will be arguing that a local occurrence is part of a single indivisible disease event and that the “but for” test on causation must be read in a commercially sensible way so that policy cover is not illusory.

The Court is also likely to hear expert evidence from epidemiologists in relation to the closure of the premises at different stages during various waves of the pandemic.

The outcome of the case will be awaited with interest by policy holders throughout the country who may be affected by refusal of an indemnity by Allianz.

Kent Carty advises insurers and policyholders in relation to insurance law claims.

Gavan Carty, Business Interruption Solicitor