In the latest of the unfolding COVID-19 business interruption insurance cases, the High Court recently handed down its decision in Carbis Bay Hotel Ltd & Anr v American International Group Ltd [2025] EWHC 1041 (Comm). The case concerned a claim brought on behalf of various Cornish businesses, including hotels and restaurants, for losses suffered from the closure of their businesses in compliance with Government restrictions imposed in response to the COVID-19 pandemic.
An "Infectious Diseases" extension ("the ID Extension") in the applicable policy provided business interruption cover in consequence of the closure of premises on the order of any government or local authority as a result of "any human infectious or human contagious Disease (excluding Acquired Immune Deficiency Syndrome [AIDS] or an AIDS-related condition)". The policy defined "Disease" by reference to a closed list of 33 diseases, which did not include COVID-19 or AIDS. The question for determination by the court was whether, on the true construction of the policy, the ID Extension nevertheless provided cover for COVID-19.
The claimants contended that the definition of Disease did not govern the scope of cover under the ID Extension, because the extension was headed "Infectious Diseases" and those words were subsequently used in the extension itself. "Infectious Diseases" was not a defined term, and so the claimants contended it had to be approached as a matter of ordinary speech, and there could be no doubt that COVID-19 was, as a matter of ordinary speech, an infectious disease. Alternatively, the claimants argued that, because AIDS was not listed among the 33 diseases in the definition of Disease, but the ID Extension expressly excluded cover in respect of AIDS, the definition of Disease could not be exhaustive when it came to determining the scope of cover under the ID Extension.
However, both arguments failed. The court concluded that the claimants' case transformed a closed-list basis of infectious disease cover into an entirely open one - a significantly different proposition from the one which insurers apparently agreed. In accordance with established principles of contractual interpretation, a compelling reason would be required to overlook the definition of Disease in the policy in favour of the ordinary and natural meaning of the words used, and no such reason had emerged. Further, while the drafting of the extension was not "the most felicitous", and the "AIDS or" language appeared to be "over-drafting", any presumption against redundancy in respect of those words did not justify making redundant the key definitional term of Disease (and the closed-list of 33 diseases referred to therein).
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. As we previously reported, the deadline for issuing proceedings for COVID-19 business interruption losses is rapidly approaching. Contact us now if you think you may have a claim.