DC Bars Limited & Anor. v QIC Europe Ltd

An arbitration clause referring differences as to amounts payable under an insurance policy to arbitration, where liability is otherwise admitted, is confined to disputes about quantum or assessment of loss.

Where the insurer disputes liability under the policy for the loss in question, including by relying on a policy limit or maximum indemnity period, the dispute is not merely one as to amount. It falls outside the arbitration agreement and is to be resolved by the court.

The claimants operated restaurants and bars insured under a business interruption policy covering interruption caused by an occurrence of a notifiable disease within 25 miles of the premises. The insurer paid an agreed sum for the first three-month indemnity period but disputed further claims arising from later COVID-19 restrictions, relying on a single exhausted maximum indemnity period.

The insurer applied for a stay under the arbitration clause, which covered differences as to amounts payable where liability was otherwise admitted. The issue was whether the dispute concerned quantum alone or also the insurer’s liability for the further losses.

1. The application for a stay was dismissed. The parties had not agreed to submit the dispute to arbitration.
2. An insurance contract ordinarily requires the insurer to hold the insured harmless against the insured loss. A claim arises when the insured loss occurs. The insurer’s dispute about whether the policy’s maximum indemnity period excluded the further losses was therefore a dispute about liability for those losses, not merely their quantification.
3. The wording of the arbitration clause was construed in accordance with New Hampshire Insurance Company v Strabag Bau AG. The reference to liability being otherwise admitted emphasised that only mere disputes as to quantum were arbitrable. A dispute involving the application of policy provisions or limits which determine whether a category of loss is recoverable raises a question of liability.
4. The fact that the insurer admitted occurrences of COVID-19 and resulting business interruption, subject to quantification, did not amount to an admission of liability for the second, third and fourth periods claimed. Its position was that one three-month maximum indemnity period had already been exhausted. That was a substantive dispute as to liability under the policy.
5. A dispute about the operation of a contractual formula for assessing business interruption loss might remain arbitrable, even if the formula required construction. That qualification did not apply where, as here, the dispute included whether the insurer was liable for the losses at all.