Hiscox renewed the submission that was rejected by the lower court. The word “occurrence” means something limited, small-scale, local and specific to the policyholder, or its business premises. It does not apply to the COVID-19 pandemic.
The appeal court held that each case of disease is properly regarded as an “occurrence”. If the intention was to restrict the scope, so that the clause only applied to the occurrence of disease at or near the insured premises, it would have said so.
Further, if successful, Hiscox’ submission would render the application of the clause highly uncertain. How local, limited, or small-scale, must the outbreak of disease be, so as to require indemnity? No reasonable insurer would have a policy that fails to provide an answer.
Effects on the insured business of cases of a notifiable disease are covered. Irrespective of where they occur. Only losses which satisfy the further elements in the clause, however, are covered.
‘due to restrictions imposed’
Another element of Hiscox 1-3 and Hiscox 4 is whether the business interruption must be ‘due to restrictions imposed’ with the force of law. The lower court held that it did. Only those promulgated by statutory instruction were relevant. Not earlier instructions by the UK Government.
Similar issues arose elsewhere: a) RSA 1 with ‘closure or restrictions placed’; b) RSA 4 with ‘enforced closure’; c) MSA 1 and Zurich 1-2 with ‘action’ preventing access; and d) Hiscox 1, 2 and 4, and MSA 2, with denial or hindrance in access ‘imposed’.
The lower court gave two reasons for its finding. First, the natural meaning of the word ‘imposed’. Secondly, the context of a resulting inability to use premises.
Generally, the appeal court agreed. ‘Imposed’ connoted compulsion. Public authorities exercise compulsion through statutory, or other, legal powers.
A restriction does not always have to have the force of law, however, before it can fall within this description. For example, a mandatory instruction given by a public authority, in anticipation of legally binding measures to follow shortly, or will follow shortly if compliance is not obtained.
On 20 March 2020, the Prime Minister’s statement that all named business must close was a clear, mandatory instruction, given on behalf of the UK Government. The named businesses, and the public, would reasonably understand that this had to be complied with. They would not inquire into the legal basis for compliance. This instruction is a ‘restriction imposed’. It does not matter whether or not it is legally capable of being enforced.
A reasonable policyholder would not understand ‘imposed’ as requiring the existence, or immediate prospect, of a valid legal basis for the restriction:
“In particular, we consider that an instruction given by a public authority may amount to a ‘restriction imposed’ if, from the terms and context of the instruction, compliance with it is required, and would reasonably be understood to be required, without the need for recourse to legal powers. This is likely to arise only in situations of emergency, as in the present case. Such an instruction would need not only to be in mandatory terms, but also in clear enough terms to enable the addressee to know with reasonable certainty what compliance requires.”