In a judgment handed down by the
It has been a busy past week for BI-related court proceedings. The
Interfax approached the court for a declaratory order that the Lockdown Regulations, and consequent interruption of Interfax's businesses, constitutes a defined event for which cover is provided in terms of the policy.
Much like Café Chameleon,
-
declaring that a notifiable medical condition or communicable disease exists within the area; and/or
- imposing quarantine regulations; and/or
- acting to restrict access to the area in terms of a law pertaining to public health or safety.
- Interfax is covered under the business interruption section of the policy;
- The Lockdown Regulations implemented in response to Covid-19 and the resultant interruption of Interfax's businesses constitute defined events; and
Old Mutual is liable to indemnify Interfax for loss of gross profit due to the defined events in an expeditious manner.
In response, Interfax argued that this interpretation of the policy wording was fundamentally flawed and that no justification exists in the policy wording for the restrictions applied by
Deciding the matter,
Interpretation of the policy wording
In interpreting the policy wording, the court held that the drafters of the policy should have reasonably considered the possibility that regulations which restricted movement or imposed quarantine restrictions would not be confined to a local outbreak only. On a proper interpretation of the policy, the parties contemplated that a local lockdown by a local authority was possible in the event of an outbreak of contagious disease. Therefore, according to the court, it follows that the policy contemplates the possibility of a national government imposing broader restrictions than those restrictions implemented on a local level. This approach to the interpretation of the policy wording led the court to an analysis of the issue of causation.
The causation debate
An insurer is only liable to indemnify a policyholder if the insured peril is the proximate cause of the loss. In determining whether Covid-19 is the proximate cause of the loss suffered by Interfax, the court was required to consider the "but for" test-
"But for the occurrence of Covid-19 within a 50 kilometer radius of the insured premises, what would have happened?"
In responding to this question, the court held that -
"If there had not been an outbreak of Covid-19, then there would have been no national lockdown, no closure of business and no interruption of the applicant's business; that is, but for the outbreak of Covid-19, which included outbreaks within the 50 kilometer radius of the insured's premises, and regulations which restricted access within a 50 kilometer radius to the insured's premises, there would have been no interruption of its business as covered in terms of the insured peril".
Therefore, according to the court, the loss to Interfax's business would not have occurred "but for" the outbreak of Covid-19, which was the trigger for the national response restricting access to the area in which the business was located. The court further ruled that an insurer cannot avoid liability under a policy because it did not foresee the unprecedented impact of Covid-19 and its consequent indebtedness due to Covid-19-related claims.
A café, hotel, restaurant and luxury travel goods retailer may have been declared victorious by the
Footnote
1. For a summary of the Cafč Chameleon v Guardrisk and
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