Bellini (N/E) Ltd trading as Bellini v Brit UW Limited

An insurance policy must be construed objectively, giving effect to an express contractual definition unless the wording provides a proper basis for departure. Where a business-interruption extension indemnifies loss caused by “damage”, and the policy defines damage as physical loss, physical damage or physical destruction, the extension does not provide non-damage cover merely because it appears under a heading referring to cover extensions. The court will not rewrite agreed wording to avoid limited or apparently redundant cover. Authorities concerning disease clauses that expressly provided non-damage business-interruption cover do not govern materially different wording.

The claimant operated a restaurant and sought indemnity from its insurer for business-interruption losses caused by the COVID-19 pandemic. The parties agreed that there had been no physical loss of or damage to the premises or property used there.

The court tried a preliminary issue concerning the proper construction of clause 8.2.6 of the policy. That clause covered interruption caused by specified disease and other perils, but stated that the interruption had to be caused by “damage”, which the policy defined as physical loss, physical damage or physical destruction. The central question was whether the clause provided cover in the absence of such physical damage.

1. Preliminary issue determined. On the proper construction of clause 8.2.6, there could be no cover in the absence of damage as defined in the policy. Damage meant physical loss, physical damage or physical destruction.
2. The policy had to be construed objectively by asking what a reasonable person, with the relevant background knowledge available at the time of contracting, would understand the wording to mean. The express definition of “damage” was clear, workable and consistently used throughout the policy. It therefore had to be given effect.
3. The words requiring interruption to be caused by damage identified the type of business interruption covered. The reference to damage as defined in clause 8.1 did not create a different or wider meaning. Nor did the placement of the clause under “cover extensions” alter the result, particularly since the policy stated that headings did not form part of the policy.
4. The decision in Financial Conduct Authority v Arch Insurance UK Ltd and others concerned disease clauses which were expressly recognised as providing non-damage cover and were not worded as cover for interruption caused by damage. Those authorities therefore did not determine the construction of the materially different clause in this policy.
5. The claimant’s proposed construction would require the court to disregard or rewrite the words “caused by damage” and “in consequence of the damage”, and would also require a broader meaning of damage in the calculation provision. Arguments based on illusory cover or redundancy carried limited weight in the construction of insurance contracts. The policy was not to be rewritten with hindsight by reference to the COVID-19 pandemic.