In a group of test cases involving insurance coverage for business interruption resulting from governmental restrictions imposed in response to the COVID-19 pandemic, on January 15, 2021, the UK Supreme Court issued a decision ruling in favor of policyholders on a number of critical coverage issues. In particular, the Court reached the following conclusions:
• Where policies provide coverage for business closures resulting from an occurrence of the disease within a specified distance from the premises, coverage will be allowed for pandemic-related losses as long as there was one occurrence of COVID within the specified radius;
• A business need not be entirely closed to fall within the coverage provisions – an insured may be covered if it was unable to use a certain part of its premises, or if it was unable to conduct a certain part of its business activities; and
• The appropriate measure of losses is what the insured would have earned had the pandemic never occurred; it is not appropriate to take into account COVID-related downturns in business prior to the closures of the businesses that triggered coverage.
The Court’s decision cannot be appealed and has the potential to impact hundreds of thousands of insureds covered by policies implicated by the decision.