Law firm highlights narrowing insurer exposure after Covid BI win

The Commercial Court has sided with insurers in a business interruption (BI) test case, ruling that American International Group (AIG) is not liable for Covid-19 losses under a policy extension with a tightly defined list of covered diseases.

The case – Carbis Bay Hotel and another v American International Group [2025] EWHC 1041 (Comm) – concerned a claim brought by a group of hospitality businesses in Cornwall, including the Carbis Bay Hotel, which sought indemnity for government-mandated closures in 2020.

Legal figures commented on the 30 April judgment, discussing the limits of pandemic-related cover and reaffirmed the legal strength of closed-list wordings.

The court found that AIG’s policy wording – which listed 33 notifiable diseases under an “Infectious Diseases” extension – did not extend to Covid-19, which was not among the named illnesses.

The claimants, represented by Simon Howarth KC, argued that the reference to “infectious diseases” should be interpreted in its plain, natural meaning, allowing for cover to extend to Covid-19. They also pointed to the policy’s exclusion of Aids – which was not on the list – as evidence that the schedule might not be definitive.

However, the judge rejected this argument. In his judgment, His Honour Judge Russen KC ruled that using a capitalised and defined term – “Disease” – signalled a clear intention to restrict cover to the listed illnesses. He called the claimants’ interpretation a “contrived inconsistency” and said it would result in “a materially different underwriting proposition”.

Acting for AIG, James Brocklebank KC of Kennedys argued that the claimants were attempting to “rewrite the contract” to expand coverage beyond what had been agreed. The judge agreed, finding that commercial common sense and settled principles of contractual interpretation did not support this view.

He also dismissed the inclusion of Aids in the exclusion clause as “over-inclusive drafting” rather than a reason to expand the scope of cover.

A history of Covid-19 BI cases

In a summary of the judgment, law firm Mishcon de Reya’s partner Ralph Fearnhead said: “This case demonstrates the difficulty in bringing Covid-19 business interruption claims where the applicable policy contains a narrow definition of disease. However, not all policies will be so limited.”

The ruling may offer relief to insurers facing a tail of unresolved pandemic-related BI claims and shows the importance of precise policy wording – particularly in complex areas such as non-damage extensions.

The decision follows the Supreme Court’s January 2021 ruling in FCA v Arch Insurance, which clarified the application of notifiable disease and denial-of-access clauses. However, that judgment did not directly address policies with closed lists, leaving the door open to cases like Carbis Bay Hotel.

Several high-profile Covid-19 business interruption (BI) insurance disputes have shaped UK insurance law over recent years.

Some notable cases included Bath Racecourse and major Premier League clubs. Some insurers involved in other cases include Allianz, NFU and Aviva.

With the limitation period for many pandemic-era claims approaching expiry, this ruling is another case concluded for this type of litigation.

While policyholders may continue to pursue claims under broader wordings, this certain court case has now drawn a line: where an explicit list of conditions restricts cover, courts are unlikely to read in Covid-19 by implication – even in the face of substantial losses.