Executive Summary
- The case concerns Carbis Bay Hotel Ltd & Anor’s claim against American International Group Ltd (AIG) under a Commercial Combined insurance policy for business interruption losses due to Covid-19 lockdowns.
- The core legal issue is whether Covid-19 qualifies as an "Infectious Disease" under the policy’s Business Interruption (BI) Cover Infectious Diseases (ID) Extension.
- The claimants seek coverage for losses from 26 March to 6 July 2020, when government restrictions forced closure of their hospitality businesses in Cornwall.
- Insurers deny coverage, arguing the policy’s defined list of diseases excludes Covid-19.
- The court must interpret whether "Disease" in the ID Extension is limited to listed diseases or includes any human infectious disease, including Covid-19.
Sanctions Highlights
- No direct sanctions imposed or referenced in the judgment.
- However, the case implicates regulatory compliance with UK government Covid-19 restrictions, which functioned as de facto operational sanctions on hospitality businesses.
- The insurers’ denial references statutory instruments (SI 2020/327 and SI 2020/350) enforcing closures, highlighting legal frameworks underpinning business interruption claims.
Emerging Risks
- Ambiguity in insurance policy language regarding emerging infectious diseases like Covid-19 creates litigation risk for insurers and insureds.
- Potential for increased claims under BI policies with infectious disease extensions, especially where definitions are unclear or outdated.
- Insurers face reputational and financial exposure if courts broadly interpret "Infectious Disease" to include Covid-19 and similar future pandemics.
- Businesses reliant on hospitality and accommodation remain vulnerable to government-imposed closures and associated insurance disputes.
Geopolitical Impact
- The case is situated in the UK, reflecting the UK government’s Covid-19 regulatory response and its legal ramifications.
- Highlights the UK’s legislative agility in imposing public health restrictions with direct commercial consequences.
- The judgment may influence UK insurance market practices and regulatory oversight of pandemic-related coverage.
- Potential precedent effect on other common law jurisdictions with similar insurance frameworks.
Economic Intelligence
- Claimants’ losses exceed the policy indemnity limit of £100,000 each, indicating significant financial impact on hospitality sector businesses.
- The closure period (late March to early July 2020) coincides with peak lockdown measures, severely disrupting revenue streams.
- The case underscores the economic fragility of businesses dependent on physical premises during pandemics.
- Insurers’ refusal to pay may affect liquidity and recovery prospects for small to medium enterprises in Cornwall and similar regions.
Strategic Recommendations
- Insurers should review and clarify infectious disease definitions in BI policies to mitigate future coverage disputes.
- Businesses should seek explicit pandemic-related coverage or endorsements in insurance contracts.
- Legal counsel should monitor evolving case law on BI claims linked to Covid-19 and similar events for risk assessment.
- Policymakers might consider standardizing infectious disease coverage terms to reduce litigation and economic uncertainty.
- Stakeholders should prepare for potential regulatory reforms affecting insurance claims handling in public health emergencies.
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**Source Notes:**
*Sanctions Intelligence Digest* — [https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1041.txt](https://empyreanprotocol.com/litigation/view/www.bailii.org/ew/cases/EWHC/Comm/2025/1041.txt)