TKC London Ltd v Allianz Insurance Plc
| Jurisdiction | England & Wales |
| Judge | Mr Salter |
| Judgment Date | 15 October 2020 |
| Neutral Citation | [2020] EWHC 2710 (Comm) |
| Docket Number | Claim No CL-2020-000219 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 October 2020 |
[2020] EWHC 2710 (Comm)
Mr Richard Salter QC
Sitting as a Deputy Judge of the High Court
Claim No CL-2020-000219
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice. Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Tim Marland (instructed by Memery Crystal LLP) appeared for the Claimant
Mr Gavin Kealey QC and Mr Keir Howie (instructed by DAC Beachcroft Claims Ltd) appeared for the Defendant
Hearing date: 22 September 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Salter QC:
Introduction
The claimant in this action, TKC London Limited (“ TKC”), operates a café restaurant known as The Kensington Crêperie at 2–6 Exhibition Road, South Kensington, London SW7 2HF. With effect from 2pm on 21 March 2020, the Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 1 required businesses of that kind to close and to cease selling food or drink for consumption on the premises. The Kensington Crêperie closed and did not re-open until 4 July 2020.
At the material time, TKC was insured by the Defendant, Allianz Insurance Plc (“ Allianz”) under a “Commercial Select” policy (“ the Policy”). The Policy includes a section entitled “Business Interruption All Risks Estimated Revenue” (“ the Business Interruption Section”). In this action, begun on 16 April 2020, TKC asserts that the Business Interruption Section responds to the business interruption losses that it claims to have suffered as a result of the closure of The Kensington Crêperie in compliance with the Coronavirus Regulations. Allianz denies liability and, by its Application Notice issued on 29 May 2020, seeks to strike out the Claim Form and Particulars of Claim under CPR 3.4(2) alternatively to have summary judgment under CPR 24.2 entered against TKC on the grounds that, on the correct interpretation of the Policy, TKC's claim is misconceived and bound to fail.
In the recent Financial List test case, The Financial Conduct Authority v Arch Insurance (UK) Ltd and others 2 (“ the FCA test case”), the court was asked to “construe a number of wordings which contain non-damage ‘extensions’ to the ‘standard’ Business Interruption cover provided by the relevant insurers .. to which the FCA refers as ‘disease clauses’” 3. The Policy relied on by TKC in the present case does not contain any such ‘disease clause’ extension. Although the sums at stake in the present action are, by the standards of the Commercial Court, comparatively modest, the Policy is largely in Allianz's standard form of policy wording. The decision in the present case may therefore be of consequence for other potential claimants. To that limited extent, this judgment is therefore something of a footnote to the comprehensive and (subject to any appeal) authoritative statement of the law and exegesis of the various policy provisions in the judgment of Flaux LJ and Butcher J in the FCA test case.
The principal terms of the Policy
The Policy document consists of several sections. It begins with an “Introduction”, which (inter alia) states that:
Your Commercial Select Policy is made up of several parts which must be read together as they form your contract of insurance with [Allianz] .. The parts of the Policy which form your contract of insurance with [Allianz] are:
• this Introduction
• the proposal, presentation of the risk, or any other information supplied by you or on your behalf
• the Policy Definitions; the Insuring Clause; the General Exclusions and General Conditions, all of which apply to all Sections of the Policy ..
• the Sections of cover selected by you (as shown on the Schedule) ..
• the Exclusions and Conditions which apply to the Sections selected by you ..
• the Schedule, which includes all clauses applied to the Policy while the Policy is in force.
The Introduction includes a page of “Policy Definitions”. This identifies (by reference to the Schedule) TKC as the “Insured”, The Kensington Crêperie premises at 2–6 Exhibition Road at the “Premises”, the restaurant and café business carried on there as the “Business” and the Period of Insurance as running from 4 September 2019 until 4 September 2020. The Introduction also contains an “Insuring Clause” in the following terms:
In consideration of payment of the premium the Insurer will indemnify or otherwise compensate the Insured against loss, destruction, damage, injury or liability (as described in and subject to the terms, conditions, limits and exclusions of this Policy or any Section of this Policy) occurring or arising in connection with the Business during the Period of Insurance or any subsequent period for which the Insurer agrees to accept a renewal premium.
The Introduction is then followed by a series of seven “Sections” each of which deals with a particular kind of risk. The two “Sections” that are relevant to the issues which I have to decide are the “Property Damage All Risks Section” (“ the Property Damage Section”) and the Business Interruption Section.
The Property Damage Section provides cover for:
.. Damage to Property Insured at the Premises ..
“Damage” being defined as:
Accidental loss or destruction of or damage to Property Insured
“Property/Property Insured” being defined as:
Buildings, Contents, Stock and other items shown and/or described in the Schedule.
There are 16 paragraphs of specific exclusions from the cover provided by the Property Damage Section, among which are:
1. Damage caused by or consisting of
(a) inherent vice, latent defect, gradual deterioration, wear and tear, frost, change in water table level, its own faulty or defective design or materials ..
..
13. Damage occasioned by nationalisation, confiscation, requisition, seizure or destruction by the Government or any public authority.
14. Consequential loss or damage of any kind or description, except loss of rent when such loss is insured by this Section
A “Basis of Settlement” clause then states (inter alia) that:
The Insurer will pay the Insured the value of the Property Insured at the time of its loss or destruction, or the amount of the Damage, or at the Insurer's option will reinstate or replace such Property or any part of such Property ..
The Property Damage Section includes a long list of Special Conditions, including the following:
45. Undamaged Stock
The Basis of Settlement for Stock includes any loss incurred less the value of any salvage
(a) in the event of undamaged Stock deteriorating and/or being condemned or otherwise becoming unusable
(b) in respect of Stock which the Insured is obliged under contract to accept from any other party but is unable to use
resulting solely from Damage as insured by this Section ..
The Business Interruption Section provides cover for:
.. Business Interruption by any Event ..
“Business Interruption” being defined as:
Loss resulting from interruption of or interference with the Business carried on by the Insured at the Premises in consequence of an event to property used by the Insured at the Premises for the purpose of the Business.
“Event” is in turn defined as:
Accidental loss or destruction of or damage to property used by the Insured at the Premises for the purpose of the Business
In the Business Interruption Section, there are 11 paragraphs of specific exclusions from cover, including:
1. Business Interruption caused by or consisting of
(a) inherent vice, latent defect, gradual deterioration, wear and tear, frost, changes in water table level, its own faulty or defective design or materials ..
..
2. Business Interruption
..
(b) caused by or consisting of change in temperature, colour, flavour, texture or finish
The “Basis of Settlement clause in the Business Interruption Section provides as follows:
The Insurer will pay the Insured in respect of each item covered, the amount of their claim for Business Interruption, provided that at the time of any event
(A) There is an insurance in force covering the interest of the Insured in the property at the Premises against such Event and that
(i) payment has been made or liability has been admitted for payment, or
(ii) payment would have been made or liability would have been admitted for payment but for the operation of a proviso in such insurance excluding liability for claims below a specified amount ..
..
The insurer will pay the Insured as indemnity in consequence of Business Interruption for
(A) Loss of Revenue, and
(B) the Increase in Cost of Working.
Loss of Revenue means the amount by which the Revenue during the Indemnity Period falls short of the Standard Revenue.
Increase in Cost of Working means the additional expenditure necessarily unreasonably incurred or the sole purpose of avoiding or diminishing the loss of Revenue which but for that expenditure would have taken place during the Indemnity Period,
A clause towards the end of the Business Interruptions Section, which is headed “Extensions”, provides that:
Any claim resulting from interruption or interference with the Business in consequence of
(A) accidental loss, destruction or damage at any Situation or to any Property shown below, or
(B) any of the under-noted Contingencies
within the United Kingdom, shall be understood to be Business Interruption by an Event covered by this Section ..
This clause is...
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