Property and business interruption

Written by Catherine Percy and Lori McConnachie

Key developments in 2025

Sky UK Ltd and Another v Riverstone Managing Agency Ltd & Others [2024] EWCA Civ 1567

The case concerned claims by Sky UK Limited and Mace Limited under a Contractors All Risk Policy for water damage to the flat timber roof of Sky's global headquarters, caused by rain ingress during the policy period.

The Court of Appeal upheld the first instance Judge’s interpretation of “damage” as any physical change impairing value or usefulness, to its owner or operator, rejecting insurers’ argument that only damage requiring immediate repair counted.

The Court of Appeal ruled that insurers were liable not only for damage occurring within the policy period, but also for the cost of remedying subsequent foreseeable deterioration and development damage resulting from insured events, subject to principles of mitigation and remoteness, overturning the Commercial Court's decision on this issue.

Investigation costs were also recoverable if reasonably incurred to determine remediation needs, regardless of whether damage was actually found.

On aggregation and the meaning of "any one event", only a single deductible applied, as the failure to install a temporary roof was a single event causing the damage.

The claimants were entitled to a monetary judgment, not just a declaration, even if their respective claims overlapped. The Supreme Court refused permission for further appeal.

The judgment clarifies the scope of policy coverage for construction projects and provides guidance on key property insurance principles, particularly regarding consequential damage and investigation costs. It confirms that insurers may be liable for post-policy deterioration if it is a foreseeable consequence of insured damage.

The decision acts as a reminder that where insurers wish to depart from normal property insurance principles, exclusions, policy limits and deductibles need to be clearly worded.

Covid-19 BI insurance claims: key UK judgments and insurer considerations

Recent UK court decisions have provided important guidance for insurers on the scope of cover, application of limits and aggregation in Covid-19-related BI claims.

The Court of Appeal in Liberty Mutual Insurance Europe SE & Ors v Bath Racecourse Company Ltd & Ors [2025] EWCA Civ 153 clarified that, under composite policies, the “any one loss” limit applies to each insured separately, unless the policy expressly provides for aggregation.

On the treatment of furlough payments, the Court of Appeal endorsed the approach in Stonegate, holding that payments received under the Coronavirus Job Retention Scheme may be deducted from BI claims as a saving under the policy’s Savings Clause.  This issue is subject to further appeal before the Supreme Court.

The subsequent decision of the Commercial Court in Bath Racecourse Company Ltd & Ors v Liberty Mutual Insurance Europe SE & Others [2025] EWHC 1870 (Comm) considered the issue of how the "any one loss" limit of indemnity operated at a more practical level, having regard to the way in which the respective Government, BHA and GBGB measures affected the multiple facilities/premises (racecourses/hotels/golf courses) owned or operated by each claimant/insured entity in the group.

The judgment clarified that separate loss calculations—and thus separate policy limits—should be applied for each relevant measure or action, and for each facility (racecourse, golf course, hotel) affected. The Commercial Court rejected the insurers’ argument for aggregation across all facilities, instead favouring a “per premises” approach. The Court also found that a new loss is triggered only by a material increase in restrictions, not by mere renewal or reduction.

For insurers, these rulings highlight the need for precise policy drafting, particularly regarding aggregation, limits, and the handling of government support payments.  Insurers should review and update policy wordings to ensure intended outcomes and mitigate exposure in future pandemic or interruption scenarios.

What to expect in 2026

Tariffs

The impact of tariffs is set to exacerbate the ongoing issue of claims inflation, further increasing overall claim spend for insurers and causing disruption to policyholders.

Inflation in replacement costs

Tariffs are expected to increase the costs on imports including machinery and construction materials whilst import controls are likely to cause additional delays to supply chains. As a result, Insurers can expect to see higher rebuild costs and longer repair times for claims arising from events such as fires, storms or floods. Ongoing claims inflation adds to the problematic issue of underinsurance for policyholders whilst Insurers will need to consider the impact on existing and future claims reserves. 

BI loss amplification

Any delays in the supply chain result in delays to a business's ability to trade after an insured event. Longer lead in times for imported components / machinery and materials result in extended timelines for repairs and increased interruption to business. Tariff related delays are likely to increase the financial losses suffered by policyholders whilst Insurers can expect to see higher claims.

Deductibles and policy retentions

The increasing costs of claims will add pressure on Insurers to pass the costs on to businesses and / consumers both by way of higher premiums and deductibles to maintain profitability.

Fraud

According to the ABI, fraudulent insurance claims continue to exceed £1.1bn in 2024, an increase of 2% from the previous year. Although motor claims remains a key exposure area for insurers, there has also been a marked increase in fraudulent commercial property insurance claims. Exaggerated losses remain the most common, accounting for £466m worth of claims fraud, an increase of 10% on 2023.

The insurance industry invests at least £200 million per year to identify fraud investing in advanced technology and data analytics to identify suspicious patterns and behaviour. Collaboration between various stakeholders (brokers, underwriters, claims) and data sharing across the industry are all important for effective fraud prevention.  Combatting insurance fraud will remain an important strategic focus for the industry.