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Business Interruption Claims

Orient-Express Hotels Limited v Assicurazioni Generali S.p.A. [2010]

In the decision of Orient-Express Hotels Limited -v- Assicurazioni Generali S.p.A. [2010] EWHC 1186 (Comm) the terms of a business interruption policy were considered. The claim followed the devastation of New Orleans and the surrounding area by hurricanes Katrina and Rita and the impact of those events on the claimant's hotel business.


Business Interruption was caused by: (1) the property damage and (2) the closure of the city to (amongst others) tourists. The policy's insuring clause provided cover for business interruption "directly arising from damage". Damage being "direct physical loss destruction" or damage to the hotel.

It was common ground that the hotel had suffered significant physical damage and that in turn had caused interruption to the business of running a hotel. What was an issue, however, was the loss that was said to flow from that interruption of business.

Generali refused indemnity under the policy. It successfully argued in arbitration that, in accordance with the terms of the policy, Orient-Express Hotels Limited could only recover in respect of loss which it could show would not have arisen "but for" the damage to the hotel and since the damage to the city was a concurrent and major causal factor there could be no indemnity under the business interruption section of the policy.

Put simply, the loss would have been suffered by Orient-Express Hotels Limited as a result of the damage to the surrounding area even if the hotel itself had not been damaged.

On appeal the question for determination was whether it was appropriate to use the "but for" test in relation to causation where there were two concurrent and independent causes: one of which fell within the cover and the another which was specifically excluded.

A distinction was drawn between inter-dependent concurrent causes and independent concurrent causes. It said that in the former case the "but for" test would be satisfied and in the latter it would not. Mr Justice Hamlen did not consider this to be a case where fairness and reasonableness required a relaxation of the "but for" test. He considered the terms of the insurance contract to be express and clear.

Warning, if operating clauses and/or the trends clauses are not so clear and there is room for ambiguity there may well be fertile ground for future litigation.

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