Calculation of indemnity

Business interruption policies have been discussed on relatively few occasions by the courts, largely because most of the disputes relate to figures rather than to legal principles, but their application can give rise to important issues of construction. In New World Harbourview Hotel Co Ltd v Ace Insurance Ltd, April 2010, Hong Kong CFI, Reyes J considered the meaning of a business interruption policy in the context of loss of business by a firm providing leisure facilities when revenue was lost as the result of an epidemic. The decision was upheld in a short judgment by the Court of Appeal in October 2010, and his reasoning was adopted in all respects. This note thus concentrates on the first instance decision.

New World Harbourview: the facts

The four claimants were all members of the New World Group and operated facilities such as hotels, convention centres and car parks. NWG obtained two Composite Mercantile Policies, including business interruption cover (‘Consequential Loss of Revenue’), subscribed to by a number of insurers represented by Ace. The policies were governed by Hong Kong law, were identical and ran for the period 1 July 2002 to 1 July 2003.