Insurer Says Gov't Shutdown Not Covered In COVID-19 Suit

By Joanne Faulkner
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Law360, London (July 22, 2020, 4:53 PM BST) -- New India Assurance has said is does not have to pay out on a U.K. business owner's claim for loss of earnings linked to the COVID-19 pandemic because its venues were shuttered as a result of government advice rather than the proximity of the virus.

Damages caused by government orders are not covered by the insurance policy taken out by K7 Holdings Ltd. for four of its bars and restaurants in Northampton in the East Midlands, New India said in July 17 defense documents.  

The venue's owner took out a policy in February for loss of income caused by an occurrence of a notifiable disease within a 25-mile radius of the pubs in the town. K7 Holdings said in its High Court lawsuit filed in June that being forced to close its businesses due to COVID-19 has cost the company more than £390,000 ($496,500) as well as subsequent expenses.

But the Indian insurance company contends that it is not liable for cash because the losses were the result of government advice introduced in March to slow the spread of the virus in England and new restrictions on food and drink venues, rather than as a direct result of a notifiable disease close to the businesses.

"The advice was not given, nor were the regulations made, as a response to any individual (or collected) occurrences of COVID-19 within a 25-mile radius of the premises," the defense reads. "The advice would have been given and/or the regulations would have been made even if there had been no such cases within the relevant area. Such cases were not the cause of closure of the premises."

K7 Holdings' income would have been hit even if its venues had remained open, the insurer says, because people had been ordered to stay at home and only make essential journeys.

"Neither of those matters were caused by any occurrence of COVID-19 within a 25-mile radius of the premises," the documents say. "They both arose as a result of the national pandemic."

New India also says that these proceedings have been brought prematurely as the insurance industry waits for the outcome of the Financial Conduct Authority's test case on behalf of thousands of businesses that say they should have been paid by insurers to cover closures mandated by the government during the coronavirus pandemic.

Many insurers have declined to pay out, arguing that the policies were not designed to cover a government-imposed lockdown.

The FCA began its High Court argument on Monday stating it was just "bad luck" that insurers could have to compensate potentially 370,000 businesses that had to shut at the height of the outbreak.

Representatives for the parties did not immediately respond to requests for comment Wednesday.  

K7 Holdings is represented by Jeffrey Gruder QC and Freddie Onslow of Essex Court Chambers, instructed by Richard Leedham of Mishcon de Reya LLP.

New India Assurance Co. Ltd is represented by Neil Hext QC of 4 New Square instructed by Keoghs LLP.

The case is K7 Holdings Ltd. v. New India Assurance Co. Ltd., case number CL-2020-000380, in the High Court of Justice of England and Wales.

--Editing by Rebecca Flanagan.

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