CL-2023-000064 - [2025] EWHC 1870 (Comm)

It seems to me that one cannot jump straight to consideration of the denial of access extension. It is necessary to start by understanding how a loss would be identified, and a claim calculated, in the context of BI consequent upon property damage, which must represent the “base case” for the BI cover in section 2 of the Policy.

As the opening words of section 2 of the Policy make clear, the starting point is that damage occurs at the Premises and causes interruption or interference to the Business at the Premises. Let us assume, then, that there is a fire at one of the Cs’ racecourses, which prevents a restaurant at the course being used for a period of time. To simplify matters, I will assume that this insured only has a racecourse, and no hotel or golf course.

In order to work out what the U/W will have to pay by way of indemnity, it would be necessary to identify the amount by which the (actual) Gross Revenue during the relevant indemnity period falls short of the Standard Gross Revenue.

The indemnity period starts from the date of the fire and continues until the fire stops affecting the results of the Business, which obviously might extend beyond the date of reopening of the restaurant. It is subject to a maximum indemnity period, which is not actually identified (for an individual insured) in the Policy. As I have explained, the parties understood something to have been agreed about this, and to have been contained in a missing spreadsheet. However, it seems clear that the maximum indemnity period was different for different types of facility, and that racecourses would (probably) be subject to a maximum of 12 months.

The Standard Gross Revenue would use the relevant insured’s income for work done and services provided in the course of the Business at the Premises, during the equivalent period in the previous calendar year. If we assume that the fire happened on 1 May 2020, the restaurant reopened in June 2020 and everything was back to normal in terms of restaurant receipts by 1 July 2020, the comparison would be between the income received between 1 May 2019 and 1 July 2019 and that for between 1 May 2020 and 1 July 2020. I would assume that this would be a comparison of the income for the whole facility (i.e. the racecourse), not just the individual restaurant.

It should not matter, however, because the figures for 1 May 2019 to 1 July 2019 would be adjusted for business trends and other circumstances so as to ensure insofar as possible that the comparison revealed only the impact of the physical damage. If the restaurant, or the racecourse as a whole, was experiencing declining attendances in 2020 unrelated to the fire damage, that ought to be factored out (i.e. the figures adjusted so that falls outside the indemnity).

In relation to the limits of cover for damage related BI, the relevant provisions are not easy to follow. Mr Kramer suggested that the only limit was the aggregate limit across all of the facilities with the same maximum indemnity periods. I have to say that this seemed odd to me. For a start, it would make limited sense to have only a per loss limit based upon the declared annual gross revenue for all of the racecourses dotted around the UK. Only an Armageddon scenario would be likely to cause physical damage to all of them. After all, the limit of liability provision contains an automatic right of reinstatement (with an undertaking to pay a reinstatement premium), such that the limit (whatever it is) must only apply to a single loss. I suspect that the intention here was that the limit would be the figure for the particular facility, as declared in the lost Schedule-like document. But I accept that this may be controversial and ultimately it does not affect any of my conclusions.

Turning to the points which are more directly relevant to the issues with which I am concerned, it seems to me obvious that one would carry out, in effect, a single calculation covering the period from 1 May 2020 to 1 July 2020. You would not calculate the indemnity race by race or meeting by meeting. That is logical, because the differential has to be calculated across the whole indemnity period.

An interesting scenario for our purposes would involve some further insured damage being suffered some time after the fire. Imagine that, in late May 2020, a further (unrelated) fire took out a stand close to where the restaurant was situated. How would that be dealt with under the Policy?

The starting point must be that there would be a new insured event: new damage, causing additional interruption to the Business. To my mind, that would require a new loss calculation, with a new indemnity period. Importantly, when it came to identifying the Standard Gross Revenue for the second calculation, it seems to me that it would be necessary to adjust the figures to reflect the fact that damage had previously been suffered to the restaurant. Unless an adjustment was made for that purpose, one would not be arriving at the results which would have been obtained “but for” the second fire, as the clause requires.

The corollary is that the calculation in respect of the first fire must continue beyond the occurrence of the second fire, at least unless and until it can properly be said that the first fire is no longer affecting the results of the Business. There might be some quite difficult questions about how this would work if the second fire genuinely rendered the first fire irrelevant – e.g. by requiring the whole area, including the restaurant, to be closed for a period extending beyond the date in June when the restaurant would have reopened. Of course, if (as in this example) the U/Ws would be providing an indemnity for the consequences of both fires, it might make no practical difference how the calculations are performed.

The short point, however, is that one would expect there to be two loss calculations in this scenario, to reflect the two insured events (fire damage leads to interruption to business), and hence the two different indemnity periods.