In a July 2025 judgment the UK high court held, not surprisingly, that there can be no business interruption claim for a business that has not yet commenced operating because there was never any business carried out at the insured property, nor any revenue earned there.
The policyholder sued for alleged business interruption losses because of the delayed opening of a children’s care home as a result of burst pipes allegedly resulting in loss of gross revenue.
The court, relying on the well-known textbook on business interruption by Riley, held that the essence of business interruption cover is to address “the interruption of risk within a business”. The insured purchases insurer to mitigate the interruption risk in return for a premium. Business interruption policies cover “the amount of loss resulting from the interruption or interference with the business”. The delayed opening of a business is not what business interruption insurance insures against.
The court found that it is inherent in the concept of business interruption that there is a business, in the sense of a corporate entity offering goods and services in exchange for money, that is ongoing when the interruption occurs. Owning and developing a property that is soon to be used to accommodate a children’s care home business is not a children’s care home business in the sense referred to in the policy. In the circumstances, the policy could not and did not respond to afford business interruption cover because there was no business being run from the property that was capable of being interrupted by reason of the physical water damage caused by burst pipes or otherwise. There was no causative loss and no loss of gross revenue.
The court throughout described the policyholder as having “a merely arguable case” but nothing more than that to satisfy the onus of it on showing that summary judgment should not be given in favour of the insurer.
Business interruption policy wordings are similar in South Africa and the same decision would be arrived at on the facts.