The specimen wordings before the Court containing Disease Clauses were issued by RSA, Argenta, MS Amlin and QBE. Whilst the Court considered coverage under each of these clauses individually, certain themes emerge on the Court's approach as to how these clauses should be applied to COVID-19 losses.
The coverage provided by Disease Clauses tends to include coverage for BI following the "occurrence" (or other phrasing) of a notifiable disease at or within a specified radius e.g. 25 miles of the insured premises. The background to this type of cover has been to indemnify for BI losses e.g. where there has been a local outbreak of an infectious disease, such as e-coli, and businesses have been required to close by local health officials while a deep clean of premises takes place.
Insurers accepted that COVID-19 was a Notifiable Disease across the UK by 6 March 2020 but argued that coverage under the Disease Clauses in their BI policies only responds to the effects of local outbreaks of COVID-19 and the measures taken locally to deal with such local outbreaks (such as the local lockdown measures imposed in Leicester); they do not respond to a pandemic, requiring action on a nationwide basis. They further argued that since the proximate cause of the loss was the localised occurrence of COVID-19, applying a "but for" causation requirement, meant that in the absence of the local occurrence, the business would still have suffered loss as a result of the Government's nationwide measures, with the result that policyholders could not claim for their BI losses under these Disease Clauses.
The Court looked first at the meaning of "occurrence". It held that there was an "occurrence" of COVID-19 when it first existed within the radius requirement of the Disease Clause, whether diagnosed or not, meaning coverage could be triggered even where individuals were asymptomatic. A slightly different approach was taken on the specimen wordings which used "manifest" rather than "occurrence". On these policies, the Court said that "manifest" meant when COVID-19 was apparent either because an individual had symptoms of the disease or had been diagnosed (even if they were otherwise asymptomatic, since the disease would have "manifested" itself to the diagnoser).
The Court then considered the nature of a notifiable disease, the fact that it is likely to be highly contagious and to spread in complicated, unpredictable "fluid patterns", and that the response of the authorities in these situations may be to respond to the outbreak as a whole rather than to individual cases, as happened with COVID-19. Against this analysis, the Court noted that as the Disease Clauses contemplated that cases of a notifiable disease could occur at a distance away from the insured premises, the parties must have contemplated that there could be cover for a widespread response to an outbreak, not limited to a localised occurrence. Since the proximate cause of the interruption suffered by businesses, for the purposes of the Disease Clause, was COVID-19, the local occurrences formed part of an indivisible widespread whole to which the Government had responded on a nationwide basis with the result that these Disease Clauses would provide cover for COVID-19 related losses – the significance of the local occurrence being to determine the date from which the period of indemnity for the loss would start to run. Having determined that the proximate cause was COVID-19 and not just the local occurrence of COVID-19, the Court held that in determining quantum of the loss, all COVID-19 related factors (i.e. the effect of the nationwide Government measures) should be taken out of Insurers' assessment of quantum.
In addition to the specified mileage requirement contained in the Disease Clauses referred to above, another RSA specimen wording (RSA 4) refers to the occurrence of a notifiable disease within the "Vicinity" of the insured location. "Vicinity" is defined in RSA 4 as: