Distant relations: business interruption insurance and business closure insurance

This article looks at COVID-19-related issues in the context of commercial and industrial insurance cover taken out against the risk of infectious disease. The focus is on government action taken and regulation passed in the U.K. and in Germany, respectively, to redress the pandemic. The insurance market offers business interruption (BI) cover (in the U.K. and internationally) as well as business closure (BC) cover (mainly in Germany) to protect against the impact of infectious diseases on commercial enterprises. The insurance law issues that came to be analysed in relation to the COVID-19 pandemic formed the subject matter of widespread litigation in both countries. Judgements were rendered in the Supreme Court in the U.K. (the FCA test case) and in the German Federal Supreme Court and now provide some authoritative legal guidance. However, the outcome of these court battles was totally different, insofar as policyholders were concerned. This article, next to offering some historical legal analysis of BI and BC insurance cover, attempts to explain why policyholders won in court in the U.K. and lost the legal argument in Germany and seeks to reconcile these diverse outcomes. The article ends with a brief outlook on how the pertinent COVID-19 insurance law issues might come to be revisited, both by the markets and in the legal community, in the context of reinsurance coverage.