Marcus Knight and Tina Walton report on a case about a business interruption claim that was caused by two separate events

Where two separate events giving rise to a loss occur, insurers have only to show that one of the events is excluded for the claim to fail in its entirety, following a recent Commercial Court decision.

In Tektrol Ltd v (1) International Insurance Co of Hanover Ltd (2) Great Lakes Reinsurance (UK) Ltd [2004], Tektrol notified a business interruption claim under its combined all risks policy following the loss of a computer source code, on which Tektrol depended for its business.

A combination of events gave rise to the loss - a computer virus deleted the code on the managing director's laptop, and shortly afterwards two computers and a hard copy printout of the code were stolen in a burglary at the company's premises.

The judge confirmed that because the relevant policy exclusion applied to consequential loss "arising directly or indirectly" from loss of information, the virus (as well as the burglary) could properly be described as an indirect cause of the consequential loss claimed.

He went on to hold that, provided the loss caused by either the virus or the burglary was excluded from coverage, that was sufficient to exclude the loss in its entirety. Even if only one of the events was excluded, the claim under the policy would fail.

This decision goes further than the rule established in Wayne Tank and Pump v Employers Liability Ltd [1974] because that case concerned a single event (a fire) with two proximate causes. In the Tektrol case two separate events occurring two weeks apart caused the loss, one only indirectly.

Claims handlers should therefore consider all potential causes of a loss when faced with a claim, especially if one of these falls within an exclusion.

' Marcus Knight and Tina Walton are with Reynolds Porter Chamberlain