Bellini (N/E) Ltd (trading as Bellini) v Brit UW Ltd

Insurance – Business interruption – Appellant claiming under insurance policy in respect of loss incurred from business interruption due to Covid-19 pandemic – Respondent insurer denying liability – High Court holding as preliminary issue that policy provided no cover in absence of damage – Appellant appealing – Whether on true construction of relevant clause policy providing non-damage business interruption cover – Appeal dismissed The appellant company carried on business as a restaurant in Sunderland. It brought a claim under an insurance policy provided by the respondent insurer in respect of loss incurred from business interruption caused by the Covid-19 pandemic. Clause 8.2 of the policy purported to provide “Business interruption – Cover extensions”. The policy provided that the respondent would pay the losses sustained in respect of each item of business interruption caused by damage to property used at the premises during the period of insurance. The respondent agreed to indemnify the appellant for interruption or interference caused by damage arising from any notifiable human infectious or human contagious disease manifested by any person while in the premises or within a 25-mile radius. The respondent denied liability on the basis that the cover was dependent upon physical damage to the premises or property, which had not occurred. The appellant argued that clause 8.2.6 was absurd, because the words “damage, as defined in clause 8.1” made no sense. Damage was not defined in clause 8.1. It simply provided for business interruption coverage subject to certain defined provisos as to damage: The reasonable intention of the parties was not to limit the extension for notifiable diseases to physical damage. The court held, as a preliminary issue, that on the proper construction of clause 8.2.6 there could be no cover in the absence of damage, defined in the policy as physical loss, damage or destruction: [2023] EWHC 1545 (Comm). The appellant appealed. Held: The appeal was dismissed. (1) An insurance policy, like any other contract, had to be interpreted objectively by asking what a reasonable person, with all the background knowledge reasonably available to the parties when they entered into the contract, would have understood it to mean. Evidence about what the parties subjectively intended or understood was not relevant to the court’s task. Where a word was expressly defined by the contract, the court would give effect to the agreed definition. Where the parties used unambiguous language, the court had to apply it: Wood v Capita Insurance Services Ltd [2017] AC 1173 considered. It was clear on the authorities that a mistake in a written instrument could in certain limited circumstances, be corrected as a matter of construction without obtaining a decree in an action for rectification. Correction of mistakes by construction required a clear mistake on the face of the instrument and it had to be clear what correction ought to be made to cure the mistake. If those conditions were satisfied, the correction was made as a matter of construction. If they were not satisfied then either the claimant had to pursue an action for rectification or leave it to a court of construction to reach an answer on the basis that the uncorrected wording represented the manner in which the parties decided to express their intention: East v Pantiles (Plant Hire) Ltd (1982) 2 EGLR 111 considered. (2) The court did not readily accept that people had made mistakes in formal documents. The correction of mistakes and construction of the clause as it stood were simply aspects of the single task of interpreting the agreement in its context, in order to get as close as possible to the meaning which the parties intended. In deciding whether there was a clear mistake, the court was not confined to reading the document without regard to its background or context. As the exercise was part of the single task of interpretation, the background and context always had to be taken into consideration. All that was required was that it should be clear that something had gone wrong with the language and that it was clear what a reasonable person would have understood the parties to have meant. Both of those requirements were satisfied here: Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 EGLR 119; [2009] 1 AC 1101 and KPMG LLP v Network Rail Infrastructure Ltd [2007] PLSCS 87; 2007] Bus LR 1336 considered. In the present case, nothing had gone wrong with the language of clause 8.2.6, whether obviously or at all. Clause 8.2 was all about business interruption losses of various kinds caused by physical damage. It was not and could not reasonably be interpreted as a non-damage cover of any kind. That was what a fair reading of the policy to a reasonably informed small-business-owning policyholder would lead them to conclude. (3) Clause 8.1.1 clearly provided for business interruption cover where there was damage to property used by the insured at the premises. The rest of clause 8.1 was about how losses claimed under that cover were to be calculated. The sub-clauses of clause 8.2 effectively provided business interruption cover for various things caused by physical damage. Clause 8.2.6, looking at clause 8.2 as a whole, was no exception. Clause 8.1 defined the “interruption of or interference with the business caused by damage” which were the words that immediately precede “defined in clause 8.1” in clause 8.2.6. In effect, it also defined the “damage” as occurring “during the period of insurance” and “the business” as being that carried on by the insured “at the premises”. The reference to clause 8.1 was not a mistake. It was making clear that the damage-based business interruption coverage in clause 8.1 was being extended in the indemnity clauses in clause 8.2. The policy had to be interpreted as at 20 October 2019 when it incepted. Clause 8.2.6 could not be interpreted through the telescope of Covid-19 which was pretty well unheard of in October 2019. (4) The judge was right that the references to the need for physical damage could not be ignored. When the policy was read as a whole, it was clear that the extensions to the business interruption cover provided were limited. The policy was not, objectively viewed, providing non-damage business interruption cover, taking into account the policy in its entirety and all the relevant elements of the wider context. There was not a clear mistake in the language used in clause 8.2.6, so the principles enunciated in East v Pantiles did not apply in this case. Jeffrey Gruder KC and Neil Fawcett (instructed by Barings LLP) appeared for the appellant; Gavin Kealey KC and Harry Wright (instructed by DLA Piper LLP) appeared for the respondent. Eileen O’Grady, barrister Read a transcript of Bellini (N/E) Ltd (trading as Bellini) v Brit UW Ltd