INSURANCE: An Introduction

The following In-Depth Overview featured in Chambers UK Bar 2024 and is awaiting update from the set.

It has been another busy year for insurance and reinsurance litigators.

A steady stream of COVID-19 business interruption cases continues to occupy the Commercial Court. There were significant decisions in October 2022 in claims brought by Stonegate Pub Company Ltd, Various Eateries Trading Ltd, and Greggs plc, with insurers securing the result that furlough payments and business rates relief must be deducted from insureds’ claims, as well as decisions on aggregation and causation issues. Appeals in two of those claims, mainly focused on aggregation issues, are pending and will be heard at the end of November 2023. Insurers enjoyed success in 2023 in claims brought by the owner of well-known restaurant chain Pizza Express and by Bellini (N/E) Ltd, which concerned sub-limits and the meaning of “damage”, respectively.

Insureds won a significant victory in June 2023 in a series of claims brought by the owners of the Excel Centre and others, who successfully argued that “at the premises” clauses provide cover even where COVID-19 at the premises was not a “but for” cause of the loss. Appeals in these claims are due to be heard by mid-2024.

The pandemic business interruption cases have also given rise to some interesting jurisdiction decisions. In Al Mana v Fidelity, the Court of Appeal found in favour of the insurers, overturning the first-instance decision. In DC Bars v QIC, the insurers were unsuccessful in their attempt to stay the claim in the Commercial Court in favour of arbitration.

Another major talking point this year is of course the aviation claims and litigation arising from the Russian invasion of Ukraine in February 2022. Claims under operator policies and lessor policies are now in full swing before the Commercial Court. The claims on the lessor policies have been scheduled for a “mega trial” due to commence in October 2024. The claims on the operator policies will need to overcome the jurisdiction challenge that has been advanced by the defendants, due to be heard in February 2024, if they are to proceed further. Added to that, the market will no doubt be keeping an eye on developments in other jurisdictions, notably Ireland and Florida, where other insurance claims arising from the invasion are also ongoing.

With regard to professional liability insurance, the decision of the Commercial Court in Discovery Land v Axis is a significant decision on the issue of when one partner will be taken to have condoned the dishonest conduct of another partner. Also of note is the Court of Appeal’s decision in Royal and Sun Alliance v Tughans, affirming the first-instance decision, that a solicitor’s firm was entitled to an indemnity under its professional indemnity insurance in respect of a claim for damages for a success fee which the firm was contractually entitled to, but which its client claimed had been paid as a result of a misrepresentation by one of the firm’s partners.

In FM Conway v The Rugby Football Union, the Court of Appeal considered important issues regarding co-insurance and rights of subrogation in the context of a construction all-risks policy.

The Technology & Construction Court determined an interesting property policy dispute in Allianz v University of Exeter. In that case, the Court held that damage and other loss caused by a controlled explosion was not covered by a property policy due to the application of the war exclusion. There was another significant property policy decision in Brian Leyton v Allianz, which concerned a claim by a petrol station operator on a motor trade insurance policy. The Court of Appeal held that an exclusion in respect of pollution and contamination did not apply in circumstances where damage to premises arose from a fuel leak that had been caused by a sharp object fracturing an underground fuel pipe, notwithstanding that the premises had subsequently been polluted or contaminated.

With regard to marine insurance, the insurers’ appeal to the Court of Appeal in Quadra Commodities v XL Insurance was dismissed. That case considered interesting issues regarding insurable interest in circumstances where warehouses were issuing multiple warehouse receipts in respect of the same goods as part of a fraudulent scheme. The insurers have secured permission to appeal to the Supreme Court, and it remains to be seen whether the issue will be resolved at the highest level in favour of insurers or the insured.

A further decision of interest is Technip v Medgulf, which is the first court decision to consider the construction of the Damage to Existing Property Endorsement within the offshore construction all-risks WELCAR form.

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Over the coming year, we can expect more decisions arising from the COVID-19 pandemic. Further business interruption claims by Arsenal, Liverpool, Tottenham and a number of other major football clubs are now well underway, seeking an indemnity for matchday revenue and other losses as a result of the pandemic. Watch out also for the Court of Appeal’s decision on the appeals in the Stonegate and Various Eateries proceedings. The continued development of the aviation claims will no doubt be of major interest to the insurance and reinsurance market in the coming months.