International Entertainment Holdings (IEH) and its subsidiary companies operated theatres and associated venues across the United Kingdom, which were closed during their period of insurance as a result of the first national lockdown.

The denial of access clause

The policy issued by Allianz to IEH contained an extension which covered 'interruption of or interference with the Business as a direct result of an incident likely to endanger human life or property within 1 mile radius of the premises in consequence of which access to or use of the premises is prevented or hindered by any policing authority.'

Among the issues for consideration by the Court were:

 1. Whether a case of COVID-19 amounts to an 'incident likely to endanger human life'; and

 2. Whether the requirement that the relevant prevention of access be by a policing authority is satisfied by central government, either being itself a policing authority or because its actions were enforceable by the police.

Incident likely to endanger human life

In the FCA test case, the Supreme Court had found (in the context of notifiable disease clauses) that each single case of COVID-19 amounted to a separate 'occurrence' triggering the cover, since an 'occurrence' was the equivalent of an 'event'; something which happens at a particular time and place, and in a particular way.  IEH argued that an 'incident' had the same meaning as an 'event' or 'occurrence' and hence had to include a single case of COVID-19.

The judge disagreed.  He decided that the Supreme Court decision in the FCA test case had not moved the goalposts for this type of denial of access clause; a case of COVID-19 does not, therefore, in and of itself, amount to an 'incident likely to endanger life'.  He endorsed the Divisional Court's comment in the FCA test case that it would be 'a misnomer to describe the presence of someone in the radius with the disease as 'an incident'' for the purpose of this type of denial of access clause.  That person might come and go without knowing they had the disease and without other people knowing they were infected. 

The judge said he had to interpret the word 'incident' as it would have been understood by a reasonable person in the position of an ordinary policyholder.  With that in mind, he found that the word '“incident”, in ordinary usage, does connote a happening which is apparent at the time, often to very many people. Notwithstanding that it can be used synonymously with “occurrence”, it would be unusual to use the word “incident” to describe something which no-one perceived at the time.'

The Court's decision was further supported by the fact that only denial of access by a policing authority was covered by the clause and that there was a short franchise period of only 4 hours, neither of which was consistent with the clause granting pandemic cover.

Policing authority

The insuring clause covered denial of access 'by any policing authority'. 

The judge roundly rejected IEH's submissions that the Government, or the Secretary of State for Health, who imposed lockdown legislation, constituted a 'policing authority' or that it made any difference that the lockdown was enforceable by the police.   

His 'first impression when reading the clause, and the parties’ arguments, was that it was a very considerable stretch for IEH to try to bring the actions of the government or Mr Hancock, in relation to the March regulations, as being the prevention of access by “any policing authority”'.

The functions of the police or similar bodies on the one hand, and central and local government on the other, are very different.  The Oxford English Dictionary definition of “policing” is 'to control, regulate, or keep in order by means of a police force or similar body; to provide with a police force.' The judge therefore found that the 'policing' authority which naturally springs to mind is the police, but the clause would also extend to other bodies which carry out policing functions.

Finally, since the insuring clause required that denial of access had to be 'by' any policing authority, that meant that the restrictions had to be imposed by the policing authority itself. The judge thought that an ordinary policyholder would not read that phrase as encompassing a denial of access by another authority whose actions might ultimately be enforceable by the police.  In this case, there was no dispute that IEH had complied with lockdown restrictions and the police had not taken action against them.

Conclusion

The upshot of the International Entertainment Holdings judgment is that denial of access wordings which are contingent upon there being an 'incident', an 'incident likely to endanger life', or upon the actions of the police or a policing authority should not respond to centrally mandated COVID-19 restrictions. 

The judgment marks a welcome return to normality following a groundswell of policyholders seeking to unpick the un-appealed findings of the Divisional Court in the FCA test case.  Every policy wording still has to be read according to the actual words used, as they would be understood by a reasonable person in the position of the ordinary policyholder.

The insurance market should take comfort that the Supreme Court decision in the FCA test case does not open the door for every policyholder benefitting from cover under a denial of access clause to ask insurers to reimburse their COVID-19 business interruption losses.   

James Deacon (Partner), Eleanor Whittaker ( Senior Associate) and Hannah Stanford (Associate) of DAC Beachcroft LLP acted for Allianz in International Entertainment Holdings.