Insurers need to have a ‘radical rethink’ as more business interruption battles are expected to come to the forefront in 2022, says law firm partner

Corbin and King, the owner of London-based restaurant The Wolseley, has secured a £4.4m win in the High Court against insurer Axa after nearly a year-long battle over business interruption (BI) cover.

However, the fight over Covid-induced BI insurance claims between insurers and the hospitality sector is not yet over, according to Mark Pring, partner at law firm Reed Smith - he warned that a significant number of businesses will have been in a similar position to Corbin and King.

He said: “This decision requires all relevant insurers to have a radical rethink.

“If 2021 was a bad year for them, [this] verdict suggests that 2022 will be much the same.”

Dispute deep dive

The claim dispute originally began in April 2021. Corbin and King brought a lawsuit against Axa in November last year after the insurer’s UK arm refused to pay out for the business’ Covid-related losses.

The High Court case therefore examined the scope of the non-damage denial of access clause wording within Axa’s BI policy, which the hospitality group felt was applicable for the purposes of its Covid-linked claim.

The BI policy was issued on 7 February 2020, covering between 12 November 2019 and 11 November 2020.

The non-damage denial of access wording within Corbin and King’s policy, according to the court document:

”We will cover you for any loss insured by this section resulting from interruption or interference with the business where access to your premises is restricted or hindered for more than the franchise period shown in your schedule arising directly from:

1. The actions taken by the police or any other statutory body in response to a danger or disturbance at your premises or within a one mile radius of your premises.

2. The unlawful occupation of your premises by third parties.

Provided that:

1. The insurance provided by this cover shall only apply for the period starting with the restriction or hindrance and ending after 12 weeks during which time the results of the business are affected.

2. Our liability for any one claim will not exceed the limit shown in your schedule.

We will not cover you where access to your premises is restricted or hindered as a result of:

1. Physical damage to property at your premises or elsewhere.

2. Strikes, picketing, labour disturbances or trade disputes.

3. The condition of or the business conducted within your premises, or any other premises owned or occupied by you.

4. Notifiable diseases, as detailed in the murder, suicide or disease cover.

5. Actions where you have been given prior notice.” 

According to the High Court judgment, published on 25 February 2022, the nature of this cover stated that the insurer will cover any loss resulting from interruption or interference with the business where access to the premises is restricted or hindered.

However, despite pandemic-driven government restrictions forcing the claimant’s premises to close from 20 March 2020 to 4 July 2020 and 5 November 2020 to December 2020, Axa told Corbin and King that it was ”not entitled to an indemnity against the loss [it] had suffered as a result of the Covid-19 pandemic”.

The hospitality group then entered administration in January 2022, due to not being able to meet financial obligations set by its majority shareholder – a Thai hotel conglomerate called Minor.

Ruling in Corbin and King’s favour, Mrs Justice Cockerill said: “I conclude that Covid-19 is capable of being a danger within one mile of the insured premises, which, coupled with other uninsured but not excluded dangers outside, led to the regulations which caused the closure of the businesses and caused the business interruption loss.”

Axa said that it would give the court’s decision careful consideration. It said: “We have been working with our customers and paying claims on policies where there is valid cover since the start of the pandemic and we will continue to do so.”

The insurer further noted that it has so far paid claims totalling above £97m.

Jeremy King, co-founder and chief executive of Corbin and King, said: “I am not a confrontational person, but I felt that the hospitality business had been badly served by insurers during the pandemic and was determined to fight for justice — not only for Corbin and King but for our industry as a whole.”

In addition to The Wolseley, Corbin and King’s group includes The Delaunay, The Bellanger and The Colbert, to name a few.