[co-author: Sophie Warren]
This article was originally published in Global Restructuring Review in August 2025, and is reproduced here with permission of Global Restructuring Review.
With the limitation clock running down for covid-19 business interruption (BI) claims in the UK, Hogan Lovells partner Lydia Savill, counsel Sara Bradstock and associate Sophie Warren offer key insights for insurance policyholders and insolvency practitioners regarding certain gaps exposed in non-damage business interruption cover before the courts, which go beyond claims related to the pandemic.
While the door is still open for covid-19 BI claims until March 2026, the English courts have already addressed issues around policy definitions, exclusions and causation, emphasising the need for clear policy wording and tailored coverage.
We are still seeing judgments from the waves of claims brought following the pandemic lockdown measures, most recently in Carbis Bay Hotel Limited and another v American International Group Ltd, which serve as useful guidance for policyholders and corporates assessing current and future coverage, or potential Covid BI recoveries, way beyond the context of a global pandemic.
In this article, we warn insurance policyholders and insolvency practitioners that they should review their policy wordings, assess their risk exposure, and consider appropriate risk solutions, as these issues are not only relevant for pending Covid claims, but for other non-damage interruption risks, such as those related to cyber- attacks or political risks.
What does BI insurance cover?
The two main kinds of BI cover are; damage-linked BI as a result of physical damage to insured property; and non-damage BI caused by an insured event that does not relate to physical damage.
Traditional BI insurance policies are typically damage-linked and often seen as part of another policy, usually property insurance. The main policy provides cover for the direct loss such as the costs of repairing or replacing the damaged property, while the BI policy covers losses in relation to the loss of profits or increased costs of working as a result of the damage to the property, which can be more costly than the damage itself.
Covid-19 brought non-damage BI insurance to the fore where the trigger to engage policy coverage was not damage to property, but some other impediment in the use of or access to property due to lockdown measures. These cases focused on the interpretation of policy language, particularly infectious disease clauses and prevention of access clauses.
Three cases brought in the context of the covid-19 pandemic include The Financial Conduct Authority v Arch Insurance (UK) Limited and Others ; London International Exhibition Centre v RSA & ors; and Various Eateries Trading Limited v Allianz.
The Financial Conduct Authority v Arch Insurance (UK) Limited and Others was a test case for SME business interruption policyholders, which established that cover was, in principle, available for Covid-19 related BI losses under certain types of non- damage BI policy wordings, though not others.
In the second case, London Excel Centre claimed for BI losses due to closures during the pandemic along with other policyholders such as hairdressers, gyms, nightclubs and restaurants, and the court applied the FCA test case to “at the premises” non- damage BI wording (i.e. where the disease triggering cover has to have occurred at/on the premises, rather than a specified radius of the premises).
Finally, in Various Eateries Trading Limited v Allianz the court considered the aggregation of losses for the closure and interruption of a chain of Italian restaurants and how to determine the number of occurrences for the purpose of applying policy limits, in the context of multiple restaurant closures due to the pandemic.
Was BI insurance fit for purpose?
Given the framing of BI coverage as intended for losses related to physical damage, destruction or dispossession, it was not surprising that policyholders or insurers were not wholly prepared for losses outside that framework. Despite the quantity of legal ink spilled in the FCA test case considering whether coverage for covid-19 BI losses was or wasn’t engaged by specific non-damage BI policy wordings, the reality is that losses of the sort caused by the pandemic had not been anticipated or adequately catered for in existing BI policy wordings.
In the end it was a lottery for any given policyholder whether their policy did or did not contain the specific key words or phrases which, per the FCA test case ruling, were deemed sufficient to engage cover. Indeed, insurers defended the FCA test case on the basis that they never intended to cover the type of losses that ultimately materialised from a nationwide government-mandated shut down of all businesses. While notifiable disease triggers in non-damage BI wordings had been deployed for a minority in the market, even here the full risks that materialised in the pandemic had simply not been anticipated and BI wordings were not designed with a global pandemic in mind.
The main issues and takeaways for policyholders
1. Causation under the policy
The UK Financial Conduct Authority was, compared to authorities in other jurisdictions, quick to intervene to provide clarity on policy wordings and sought a declaration from the High Court of England and Wales on policy interpretation in the context of non-damage BI.
On appeal to the Supreme Court, the policyholder-favourable judgment held that each and every individual case of covid was equally a cause of government restrictions and BI losses and there was therefore no need to connect any one case of covid in the relevant area to the cause of the lockdown measures that brought about the BI loss; all individual cases of covid-19 were equally a cause of the lockdown measures, so provided a policyholder could demonstrate one case of covid-19 within the relevant vicinity of their premises coverage would be triggered. This was a much less stringent test than the default “but for” causation test. This reasoning was subsequently applied to other BI clauses, such as “at the premises” wording (in London International Exhibition Centre v Allianz Insurance Plc & Ors) and raised by policyholders in respect of certain “denial of access” wording (Liberty Mutual v Bath Racecourse).
Takeaway: Certain policies only covered interruption caused by a covid case at the insured premises, within a radius of the premises, or by restrictions caused by only certain authorities. These variations have different evidentiary thresholds and could have a significant effect on coverage, so should be considered carefully when drafting or when assessing the ability to claim.
2. Definitions and exclusions
The FCA test case considered disease clauses providing cover for BI losses resulting from a list of diseases, including “any notifiable disease”, which came to include covid-19 in March 2020. However, many policies contained “closed lists” of specific diseases with no broader, dynamic headings. Policyholders tried to argue that “plague” could include covid-19 but this was rejected in Rockliffe Hall Limited v Travelers Insurance Company.
There are benefits of certainty associated with including a specified list of diseases in a policy, however the case law demonstrates the risks in having all eggs in one defined basket. Courts were reluctant to add diseases to defined list (as in Rockliffe), or to define terms in a list so as to transform a closed list into an open one, especially where the defined terms were not consistently used throughout the policy (as in Carbis Bay Hotel Limited).
Takeaway: Policyholders should consider whether it is appropriate to include a defined list of insured or excluded events or risks and ensure there is no ambiguity with the terms that are included in the list, and that they are used consistently throughout the policy. Similar considerations apply to policyholders or insolvency practitioners assessing existing BI coverage for closed-list clauses.
What other risks does BI insurance cover?
Although another global pandemic may not be the primary risk concern for policyholders or insolvency practitioners, the claims experience from covid-19 highlights issues that apply to other, more current, non-damage BI risks. These might include cyber-attacks disrupting store operations and payment services, meaning a policyholder is unable to process or effect sales or transactions; utility and infrastructure failures affecting power supplies where there is a “denial of access” or where business facilities or physical sites are unable to run; and (geo)political risks and trade policies affecting supply chains, meaning goods or components are not available, or established suppliers can no longer be used. Insurance policies may not have tightly defined definitions in relation to political interference or government intervention.
Relevant non-damage BI risks might also arise as a result of climate change, with related weather issues affecting customer traffic or product deliveries, meaning businesses may operate but cannot be accessed or provide goods or services to customers. Policyholders and insolvency practitioners could have difficulty establishing causation in these circumstances.
Key lessons five years on
Five years on from covid-19, it is more important than ever to be clear on what your policy covers – what are the specific trigger events? Has it been tailored for your specific business functions? Is the geographical or temporal scope appropriate?
It’s also important to stay on top of key risks – what risks could affect your business? Are these covered under conventional policies? Many businesses do not elect to pay for additional cover or non-damage BI extensions, and many SMEs did not have any BI cover pre-covid-19. It’s important to consider whether paying extra for even the less-common risks may be worthwhile in the long-term.
Policyholders should also consider alternative risk transfer mechanisms and whether captive insurance (where non-insurance companies, or groups of companies, provide insurance coverage for the risks of its shareholders or affiliated companies) or parametric insurance (where the probability of the occurrence of a peril is covered, and claims are paid if pre-agreed threshold conditions are met) insurance solutions could be appropriate.
Finally, policyholders and insolvency practitioners should consider the merits of pursuing any BI claims disputed by insurers before limitation expires this March.
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