Ann Grimes (t/a The Cleveland Arms) & Ors v Liberty Mutual Insurance Europe SE

Under a business interruption policy, “discovery” of a notifiable disease at insured premises requires proof that a case occurred there during the relevant period, but it does not require diagnosis, contemporaneous knowledge by the insured or public authority, or discovery before closure. The case may be discovered before or after closure. Causation is established where the case was one of the causes of the compulsory closure, including alongside other cases of disease. A contractual clause expressly stated to be a condition precedent will generally be treated as such. Notification must be given immediately, meaning with very rapid action after the insured becomes aware of the relevant factual event. Silence or reliance on other defences does not ordinarily create an estoppel without an unequivocal representation.

The court tried preliminary issues arising from five groups of business interruption claims brought by small businesses against their insurer. The claims concerned cover for compulsory closure following discovery of a notifiable disease at the premises, and compliance with a policy condition requiring immediate notification of events capable of resulting in a claim.

The assumed facts included the presence of persons with Covid-19 at the premises, compulsory closures under the applicable coronavirus regulations, and differing dates of notification. The issues were the meaning of “discovery”, causation and public-authority knowledge, whether General Condition 5 was a condition precedent, the time for notification, and whether the insurer was estopped from relying on late notification.

1. Issues 1–3. Extension 2(a) required the assured to establish a discovery of a case of Covid-19 at the premises between the date on which Covid-19 became notifiable in the relevant territory and the date of closure. The discovery could occur before or after closure. The court did not decide what particular evidence would be sufficient to prove discovery.

2. The closing authority did not need to know of the specific case at the premises or to have taken it into account. The relevant case was sufficient if, together with other cases in the relevant locality or country, it caused the closure. This followed the approach in London International Exhibition Centre Plc v Allianz Insurance Plc and others and was consistent with the reasoning in FCA v Arch Insurance (UK) Ltd [2021] UKSC 1.

3. The court considered that this conclusion made the precise linguistic distinction between “discovery”, “occurrence” and “manifestation” less important. It nevertheless held that a case had to be discovered, while leaving the evidential question open.

4. General Condition 5. The clause was a condition precedent to the insurer’s liability. The description of the clause as a condition precedent was highly influential. The fact that subparagraphs (a) to (f) imposed different obligations did not justify treating the clause as merely an innominate term.

5. Notification under subparagraph (a) was required immediately after the assured became aware, or discovered, that there had been a case of Covid-19 at the premises within the relevant period. The judgments in the FCA test case and the London International Exhibition Centre litigation were not themselves events capable of giving rise to a claim. Notification had to be very rapid, with the precise period depending on the circumstances.

6. Estoppel. The insurer’s letters denying liability on other grounds did not amount to an unequivocal representation that it would not rely on General Condition 5. The later letters’ reservation of rights reinforced that conclusion. The estoppel plea therefore failed.

This was a first-instance preliminary issues trial in the Commercial Court. No appellate decision was stated in the judgment.