By Christopher Crosby

Law360, London (June 3, 2020, 5:42 PM BST ) Allianz has struck back against a lawsuit filed by a London cafe denied an insurance payout after its business was closed due to the COVID-19 pandemic, saying the policy only covers work interruptions caused by theft and damage to property.

A claims specialist for the insurer told London's High Court in a May 25 filing that the government's decision to close down businesses due to the coronavirus doesn't amount to an insurable "event" under the cafe's £2.7 million ($3.4 million) plan.

The lawsuit filed by the Kensington Creperie is likely to be just part of the surge of litigation against insurers from business who've been denied coverage due to the fact that they can't open their doors.

But the insurer argued that even if the cafe had been allowed to remain open during the lockdown, no one would have been able to come owing to restrictions on travel and group gatherings.

"The revenue generated by the business on the above hypothesis would have been zero, since no customers could or would have visited the cafe during the relevant period (alternatively, it would have been no more than the revenue that has in fact been generated by the business, if it has generated any," wrote Keir Howie of 7KBW chambers.

The cafe's staff didn't have to put in more time or cost to offset the business' lost revenue, the insurer added. Nor are perishable goods covered, since it wasn't an "accident" that they spoiled, Allianz claimed. 

Allianz also denied liability in connection with the cafe's alcohol license, saying the regulations introduced by the government in March barred sales but didn't alter licenses themselves. Even if the cafe was allowed to sell drinks from its doorstep there wouldn't have been anyone to turn up because people weren't allowed to leave their homes, Howie wrote.

The cafe, located in an affluent area of London, says it shuttered its doors on March 21 in accordance with the public health regulation passed by government officials and has suffered financial losses due to the food that went to waste.

The cafe's owner, TKC London Ltd., has yet to estimate the cost of the pandemic, saying its losses are "ongoing."

The insurance terms include coverage for business interruption loss "resulting from interruption of or interference with the business carried on by the insured at the premises in consequence of an event to property used by the insured" at the business premises.

The policy also includes indemnity for "accidental loss or destruction of or damage to property used by the insured at the premises for the purpose of the business."

The Financial Conduct Authority has launched legal action to ensure insurers are liable under business interruption policies, though attorneys have cautioned that there was no certainty, and no timetable.

The Association of British Insurers, a trade body representing the sector has warned lawmakers that their members have estimated they will pay out approximately £1.2 billion to support businesses affected by the COVID-19 outbreak.

TKC London Ltd. is represented by Tim Marland of Quadrant Chambers, instructed by Memery Crystal LLP.

Allianz is represented internally by Keir Howie of 7KBW chambers.

The case is TKC London Ltd. v. Allianz Insurance PLC, case number CL-2020-000219, in the Commercial Court of the High Court of Justice of England and Wales.

--Additional reporting by Martin Croucher and Bonnie Eslinger. Editing by Rebecca Flanagan.

Correction: An earlier version of  this article wrongly named the author of Allianz's defense filing. That error has been corrected.

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