London Creperie’s arguments tossed aside as summary judgment awarded in business interruption insurance claim

In TKC London Ltd v Allianz Insurance plc  [2020] EWHC 2710, the Commercial Court considered a company and its insurer’s arguments on policy wording relating to business interruption following losses arising from COVID-19 closures, awarding summary judgment in favour of the insurer.

Due to the government mandated lockdowns in March 2020, the Kensington Creperie operated by TKC London Ltd was required to close and cease sale of food and drink consumed on the premises.

The forced closure of business led to significant losses for TKC.

Definition of loss in insurance policy

TKC was insured by Allianz and the insurance policy contained a section entitled ‘Business Interruption’ which read:

Loss resulting from interruption or interference with the business carried on by the Insured at the Premises in consequence of an event to property used by the Insured.”

Event was defined as:

“Accidental loss or destruction of or damage to property used by the Insured at the Premises for the purpose of the Business.”

The wording is different to those considered in The Financial Conduct Authority v Arch Insurance (UK) Ltd and others.

TKZ argued that this section covered losses sustained as a result of the forced closures due to the pandemic which would fall under “Event” and that “accidental” should mean more than something which was “unlooked for or unintended” and that “loss of property” should include a loss of the use of the property. When Allianz disputed this, contending that the loss of property should refer to the physical loss and that this type of loss was not covered by the policy, TKC issued proceedings against Allianz.

Allianz applied to the Court for summary judgment against TKC on the basis that TKZ’s interpretation of the policy was incorrect and misconceived and the claim was bound to fail. In making submissions on the interpretation of “loss”, Allianz referred to the reasoning applied in Tektrol Ltd v International Ins Co of Hanover Ltd¹

“Loss” is a word whose meaning varies widely with the context in which it is used. If a man said to you: “I have lost my wife”, you would understand him to mean one thing outside the maze at Hampton Court and another outside an undertakers in the high street.”

Tektrol Ltd v International Ins Co of Hanover Ltd [2005] EWCA Civ 845

Allianz in its skeleton argument stated:

Allianz is acutely conscious of the fact that the coronavirus pandemic has had a severe impact on many of its policyholders, including those such as TKC which operate in the hospitality sector. It has every sympathy with those affected .. Allianz also understands that policyholders with [Business Indemnity] cover will naturally wish to explore the question of whether or not it responds to the losses that they have suffered. Equally, however, it is vital for the functioning of such insurance and for the benefit of policyholders with valid claims that Allianz should only pay claims in cases where the policy requirements are satisfied, and not otherwise.

What is summary judgment?

The court may give summary judgment under CPR 24 against a claimant or a defendant, either on the whole of the claim or on a particular issue, if it considers that there is:

• No real prospect of that party succeeding on the claim or defence.
• No other compelling reason why the claim or issue should be disposed of at a trial.

What is the basis of an application for summary judgment?

An application for summary judgment can be based on:

• A point of law (including a question of a point of construction of a document such as a contract);
• The evidence which can reasonably be expected to be available at trial (or the lack of it); or
• A combination of both.

Summary judgment awarded following Court’s interpretation of “loss”

The judgment details the factors that must be taken into account when considering summary judgment. It was difficult to articulate any evidence relevant to interpretation which was likely to exist and although not available on the hearing of the application, could be expected to be available at trial. In addition to this, the Judge’s decision included the arguability of the Claimant’s submissions on interpretation.

The High Court agreed with Allianz in holding that “loss” must necessitate some physical loss and it could not be said that it included temporary loss of use of property. The Court granted summary judgment in favour of Allianz and the claim was struck out.

Read the full judgment here: TKC London Ltd v Allianz Insurance plc  [2020] EWHC 2710.

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