The relevant clause in your policy is the public authority restriction clause. This is what is referred to in the Test Case as a hybrid clause. This means that the clause contains a series of elements which must all be satisfied before Hiscox can confirm cover and calculate the amount of any loss due to you under the policy.
The elements are that:
- following an occurrence of Covid-19,
- a public authority imposes a restriction,
- which results in an inability to use your insured business premises,
- which causes an interruption to your business; and
- it is this interruption which results in loss to your business.
Occurrence of Covid-19
The Supreme Court's judgment means that the majority of Hiscox customers do not need to take any further steps to establish an occurrence of Covid-19. If your policy wording specifies that the occurrence has to be within one mile of your business premises, please see the further note below.
Restriction Imposed by a Public Authority
The judgment confirms that a restriction imposed is a mandatory measure or instruction, given by a public authority exercising its statutory or legal powers, that the addressee would reasonably understand has to be complied with. This can follow a clear instruction about the nature of the restriction and that compliance is required, even if it does not yet carry the force of law or imminent threat of legal compulsion. For example, the Government's announcement on the evening of Monday 23 March 2020 made it clear which businesses had to close, even though the relevant statutory regulations did not come into force until 26 March 2020.
Inability to Use
The Supreme Court has confirmed that an inability to use can relate to the whole or a discrete part of your insured business premises, or the whole or discrete part of your business activities on the insured business premises. There must be either an inability to use the premises for a discrete part of the relevant business activity, or an inability to use a discrete part of the premises for the relevant business activity. An impairment or hindrance in use would not be sufficient. For example, a restaurant that opened for take-away or a shop that provided online or telephone sales can claim for its loss of in-person business.
Interference with or disruption to a business as a result of all the above elements is sufficient to amount to an interruption within the meaning of the policy.
If all the above elements are established then you will be entitled to recover your loss arising from the interruption adjusted in accordance with the terms of your policy. The Supreme Court confirmed that our assessment of this loss cannot take into account trends in your business that would have been caused by the pandemic even without the restrictions imposed on your use of the business premises. Loss will be calculated for each claim individually, based upon the financial information you provide us about your business.
Application of Test Case
The Test Case began in June 2020 and only considered the March 2020 restrictions. However, the principles set out in the Supreme Court judgment can be applied to all subsequent national or local tier business restrictions.
The Supreme Court's judgment will be relevant to Hiscox policyholders with business premises in England, Wales, Scotland and Northern Ireland.
One Mile Wording
The Supreme Court confirmed that if the public authority restriction clause in your policy specifies that the occurrence of the disease has to be within one mile of your insured business premises, then you also have to prove the existence of a case of Covid-19 within one mile of your business premises before the relevant March 2020 (or subsequent) restrictions were imposed. Where possible, we will assess this for you using data in the public domain about Covid-19 occurrences in the relevant time period. The High Court judgment in September 2020 considered the ways you might prove such an occurrence, and the Financial Conduct Authority (FCA) is due to issue guidance on this issue shortly. We will provide further details as soon as we are able to do so.