In a landmark decision, the UK Commercial Court has ruled in favour of insurer’s Covéa and Markel on a non-damage business interruption case linked to the COVID-19 pandemic.
The dispute was between the two insurers and their respective reinsurers, Markel’s being General Reinsurance AG, and Covéa’s UnipolRe Designated Activity Company.
The ruling has overturned a previous pro-reinsurer arbitration decision, potentially setting a precedent for ongoing disputes related to pandemic-induced business interruptions. It also emphasizes the importance of policy wording and interpretation in addressing pandemic-induced business interruptions.
The judgment considered two key issues, the meaning of “catastrophe” under the property reinsurances and the operation of the reinsurances’ hours clauses. The court’s ruling suggests a more expansive interpretation of these policy wordings, potentially paving the way for a broader range of business interruption claims to be recognized.
The two reinsurers further added there had been no “catastrophe”, specifically that the use of the word it is inherent in the meaning of “catastrophe” and that it is something capable of causing physical damage.
The implications of this ruling have the potential to further impact the whole re/insurance market and to significantly impact outstanding COVID-19 reinsurance recoveries.
The ruling could provide much-needed support to insurers facing mounting business interruption claims.
In its decision, the court emphasised the need to balance the interests of insurers, reinsurers, and policyholders. This delicate balancing act is likely to become even more critical as the insurance industry continues to navigate the complexities of pandemic-induced business interruptions.
The UK Commercial Court’s decision serves as a reminder of the enduring importance of policy wordings and their interpretation in an ever-changing risk landscape.
