The U.K. Ruling's Impact on U.S. Insurance Cases: A Closer Look

U.K. High Court Ruling on Business-Interruption Claims

Last week, the U.K. High Court issued a ruling involving business-interruption claims against policies issued by eight insurers. Jason Schupp of the Centers for Better Insurance describes the ruling as a 'mixed bag' for U.K. insurers and policyholders, noting that it has little relevance for their U.S. counterparts.

Differences in U.S. and U.K. Insurance Policies

In the U.K. case, Schupp writes, 'the fundamental theme running through the insurers' defense was that the policies only covered localized outbreaks, not global pandemics.' This contrasts with U.S. property/casualty insurers, where disease coverage is an affirmative coverage not included in most U.S. commercial property policies, according to Michael Menapace, a professor of insurance law at Quinnipiac University School of Law and a Triple-I non-resident scholar.

U.S. Business Interruption Disputes

U.S. business interruption disputes have so far turned on two key policy features: U.S. business-interruption coverage almost always requires property damage to trigger a payout, and nearly all U.S. COVID-19-related court cases have involved policies that specifically exclude viruses. 'The U.K. court did not address either the question of property damage or the applicability of a virus exclusion,' Schupp writes. As Menapace puts it, 'Policy language controls whether COVID-19 interruptions are covered... The threshold issue [for U.S. insurers] will be whether the insureds can prove their business losses are caused by 'physical damage to property'.'

In conclusion, while the U.K. ruling provides some clarity for British insurers and policyholders, it offers little guidance for U.S. counterparts due to significant differences in policy language and coverage. For U.S. businesses, understanding the specifics of their insurance policies and the potential for coverage in the event of a pandemic or other business interruption is crucial. Consulting with an insurance expert or legal advisor can help navigate these complexities and ensure that businesses are adequately protected.