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Published 18 October 2019
On 3 October 2019, the Met Police tweeted: “People on a privately-owned fire engine had sprayed a liquid at the Treasury building….Local road closures are in place while police deal.”
This demonstration was orchestrated by Extinction Rebellion, environmental activists, who planned protests in London between 7 and 19 October. Their aim is to “non-violently disrupt the government…target corporations, ministries and infrastructure that maintain our toxic system” in order to compel government action on climate change. However, the fire-engine incident shows that non-violent does not mean property will not end up becoming collateral damage. Clearly, there will be clean-up costs but there may also be business interruption (BI) losses where businesses close their doors to protect their customers and staff if they are in close proximity to the demonstrations.
This article highlights some of the policy coverage implications for insurers.
It is worth stressing that the scope of cover will always be determined by the terms of the policy. Generally speaking, fortuitous damage to property exceeding the excess will be covered by the policy, subject to the policy limits.
If damage is caused during a number of related demonstrations, interesting questions arise as to whether single or multiple excesses and limits apply to the claim. First, it is important to establish if the different demonstrations are truly related. Then, it becomes necessary to review the language used in the policy to aggregate losses, to determine whether one, or more, deductibles and policy limits apply to the losses. Contrast, for example, wording which aggregates losses arising out of one “event” (an event which occurs at one specific time and location) with an “originating cause”, where the losses can arise from a continuing state of affairs.
Depending on the nature of the demonstrations, the wording of the policy will need to be considered to determine whether or not damage caused by riot or civil commotion is covered or excluded. In the unlikely event that there is a full-blown riot, insurers can recover their outlay for property damage claims (limited to £1 million) under the Riot Compensation Act 2016 (there is no recovery for consequential losses).
The general position is that BI losses are only covered where they are consequent upon physical damage to the insured’s property. As such, where a policyholder merely suffers a downturn in its business because the demonstrations deter or prevent customers from visiting their premises or otherwise doing business with them, would not be covered.
However, many policies now provide extended cover for BI losses brought about by denial of access or loss of attraction, without the policyholder’s property having to be damaged. Such covers are likely to carry lower policy limits and the policyholder will have to prove a causative link between the loss to its business and the particular contingency insured against.
The implications of climate change for the insurance industry are huge and explored in further detail in: From Fossil Fuels to Renewables: The Challenge of Climate Change
Denise Eastlake is a Senior Associate in the Global Insurance team at DAC Beachcroft LLP.
This article was first published in Insurance Day.
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