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Policy interpretation – “interruption”

01 April 2021 Donald Dinnie, Norton Rose Fulbright
Donald Dinnie, Norton Rose Fulbright

Donald Dinnie, Norton Rose Fulbright

The United Kingdom Supreme Court, in the FCA Test case appeal, dealt with the meaning of “interruption” in a Business Interruption policy.

The policy wording required there to be losses resulting from “an interruption to your activities…”

The court held that the ordinary meaning of “interruption” is quite capable of encompassing interference or disruption which does not bring about a complete cessation of business or activities.  It may even be may slight.  But slight interruption will only be relevant if that has a material effect on the financial performance of the business.

The possibility that the interruption may be partial was also inherent in the policy provisions which dealt with the calculation of the business interruption loss and which envisaged that the business may continue operating during a period of interruption but with reduced income or increased costs of working.

The various heads of cover for perils causing “interruption to your activities” are plainly intended to apply in circumstances where there is only limited interruption and not a complete cessation of activities.

Where insurers intend to insure only a complete and total cessation, the policy wording is easily refined or an appropriate definition can be added to the policy.

 

First published by: Financial Institutions Legal Snapshot

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