Allianz Escapes London Cafe's Suit Over Pandemic Coverage

By Joanne Faulkner
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Law360, London (October 15, 2020, 5:27 PM BST) -- A  judge has axed a London cafe's lawsuit that sought to force Allianz Insurance PLC to cover its business losses linked to COVID-19 after determining on Thursday that the claim was "bound to fail."

Richard Salter QC, sitting as a deputy judge of the High Court, granted Allianz's application to bring an early end to the proceedings brought by Kensington Creperie. The cafe was seeking a judicial declaration that it will be covered for the pandemic-linked losses caused by the forced closure of its restaurant under its $2.7 million ($3.36 million) policy with Allianz.

The cafe, located in an affluent area of London, says it shut its doors on March 21 in accordance with the public health regulation passed by government and has suffered financial losses because food went to waste. The cafe says it should also be covered for the alcohol sales it failed to ring up as a result of the pandemic shutdown.

The two sides were arguing over whether the closure of the business and the deterioration of the stock as a result of the coronavirus restrictions could be considered a "business Interruption by any event" under the policy. The cafe had hoped to establish that the temporary loss of access to the restaurant should qualify under the policy as an event, but deputy judge Salter said it "cannot sensibly be interpreted" in this way.

The deputy judge also determined on Thursday that any spoiling of stock was a consequence of the business being closed, not its cause.  

"The deterioration of the Kensington Creperie stock during the period of closure did not cause TKC's business to be interrupted or interfered with, because…it occurred at a point at which that business was already closed as a result of the coronavirus regulations," the deputy judge wrote.

Allianz argued during the proceedings that the government's decision to close down businesses amid the coronavirus does not amount to an insurable "event" under the cafe's policy.

The insurer maintained that, even if the cafe had been allowed to remain open during the lockdown, non one would have been able to visit because of restrictions on travel and group gatherings.

Allianz also denied liability in connection with the cafe's alcohol license, saying the regulations introduced by the government in March barred sales but did not alter licenses themselves. Nor are perishable goods covered, since it wasn't an "accident" that they spoiled.

The creperie said in its lawsuit, filed in April, that it has a commercial insurance policy from Allianz for a year-long period that began in September 2019. The terms include coverage for loss of business "resulting from interruption of or interference with the business carried on by the insured at the premises in consequence of an event to property used by the insured" at its premises, the cafe said.

The policy also includes indemnity for "accidental loss or destruction of or damage to property used by the insured at the premises for the purpose of the business."

The lawsuit is one of many that have been brought against insurers by businesses that have been denied cover after they shut their doors due to the COVID-19 19 pandemic. The High Court ruled in September that insurers should have to pay out on claims to approximately 370,000 businesses forced to close, in a landmark test case on the scope of the cover offered by their policies during the pandemic.

Deputy Judge Salter noted on Thursday that the policy relied on by the cafe does not include any of the "disease clauses" that were the subject of the Financial Conduct Authority's test case. 

TKC London Ltd. is represented by Tim Marland of Quadrant Chambers, instructed by Memery Crystal LLP.

Allianz is represented by Gavin Kealey QC and Keir Howie of 7KBW chambers, instructed by DAC Beachcroft Claims Ltd.

The case is TKC London Ltd. v. Allianz Insurance PLC, case number CL-2020-000219, in the Commercial Court of the High Court of Justice of England and Wales.

--Additional reporting by Christopher Crosby and Bonnie Eslinger. Editing by Ed Harris.

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