Dear All,
Here are a few thoughts.
J

[1] CONCEPT OF ‘A CAUSE’
The SC held that the insured peril (eg a COVID case within the relevant
geographical radius) was a cause of government action. I'm pleased that
the SC recognised that the concept of being 'a cause' in (at least)
private law is broader than being a necessary [ie but for] factor. Both
Richard Wright and I argue that private law does and should recognise
this broader concept of being ‘a cause’ regardless of context.

I believe my way of capturing this concept, the extended but-for test
[35 OJLS 697-726], is more forensically straightforward than NESS,
namely

-       a factor is a cause of an injury if, but for it, (i) the injury would
not exist or (ii) an actual contribution to an element of the positive
requirements for the occurrence of the injury would not exist-

No one case of COVID was necessary for the govt action which led to the
business interruption, but each case made an actual contribution to the
prevalence of the disease which triggered that action, even if that
prevalence was oversubscribed (ie there were more cases than would have
been needed to trigger that action so that no case was alone necessary).

[2] ADDITIONAL REQUIREMENTS
Both Richard and I also argue that the concept of being ‘a cause’ is
distinct from another issue, namely which cause-consequence links are
relevant in the particular legal context. In other words, are additional
qualities of the cause-consequence link required before the claimant can
establish their case (eg legal responsibility in tort; policy cover in
insurance)? In the tort of negligence this issue is labelled remoteness
of damage (UK) or the scope of responsibility/liability (USA). In the
interpretation of insurance policies this separate issue has been given
a causal label: ‘proximate cause’.

In some identifiable contexts such as duress in contract, the additional
quality required of the cause-consequence link is that of necessity. In
FCA the insurers argued that the policies also set up this requirement
of necessity. However, the SC held

that the insured peril was a cause of government action (see [1] above)
and
that it was not the intention of the parties that the ‘proximate cause’
link between this cause and the government action also be one of
necessity. Adam has explained this conclusion on [2]: the parties must
have contemplated diseases going outside the relevant area; and this
indicated that the proximate cause test the parties intended to be
required was satisfied by the link between the local occurrences and the
national reaction even if the but for test was not satisfied because

       "[195] it seems to us contrary to the commercial intent of the
clause to treat uninsured cases of a notifiable disease occurring
outside the territorial scope of the cover as depriving the policyholder
of an indemnity in respect of interruption also caused by cases of
disease which the policy is expressed to cover. We agree with the FCA’s
central argument in relation to the radius provisions that the parties
could not reasonably be supposed to have intended that cases of disease
outside the radius could be set up as a countervailing cause which
displaces the causal impact of the disease inside the radius." 

[3] QUANTIFICATION OF LOSS
This is a distinct step that takes into account the ‘rubbish restaurant’
point Sandy makes.





On 2021-01-18 10:42, Matthew Hoyle wrote:
> Thanks Sandy and Neil and also, congratulations Adam.
>
> On Sandy’s point about a “rubbish restaurant” not having a
> claim, could the comparison not be made to the debate which was had on
> this group some months ago regarding the Australian case where a man
> was imprisoned falsely but could have been imprisoned lawfully
> (apologies, the name escapes me). I think Rob Stevens took the view
> that a person who was always going to be imprisoned hadn’t
> “lost” anything in a particular, backward looking sense. That was
> a controversial example but it seems the “rubbish restaurant” is
> more in line with the orthodox concept of defamed person with what
> turns out to be a terrible reputation or perhaps a case like Jobling v
> Ass. Dairies, where the claimant didn’t really have a back worth (in
> damages terms) the same as a “normal back” to begin with.
>
> As you say, it may just be a question of interpretation: but then that
> engages a general gripe about “standard form” contract cases which
> take no account of the particular factual matrix between the parties
> (this case in particular, as most business who actually signed the
> contracts weren’t represented). The idea that small businesses
> signing an insurance contract can be objectively construed as them
> agreeing to these complex causation concepts seems bizarre. Of course
> there is an instrumental reason for construing all the same wordings
> and clauses in insurance contracts in the same way, but I don’t
> think you are really engaging in an exercise of contractual
> interpretation at that point as you are in a case like e.g. Arnold v
> Britton.
>
> From: Sandy Steel <sandy.steel@wadham.ox.ac.uk>
> Sent: 18 January 2021 10:16
> To: Adam Kramer <akramer@3vb.com>; Neil Foster
> <neil.foster@newcastle.edu.au>; obligations@uwo.ca
> Subject: [Spam?] Re: COVID, insurance and causation
>
> Thanks, Neil and congratulations on the result, Adam! Good for
> academics working on the law of causation, and some incidental
> benefits for small businesses, I believe.
>
> It'll be interesting to see if the remarks on the possibility of
> causation being satisfied without the but-for test being satisfied
> (which have been made judicially before, though perhaps not as
> lucidly) have much impact beyond this context. On the one hand, the
> UKSC sets out the usual mantra that causal questions 'depend upon the
> context' but, on the other, the majority's remarks at [181]-[185] are
> pretty broad.
>
> One thing that interests me is the interaction between the concepts of
> causation and "loss" here. Normally, causation and loss are bound up
> with each other because both embed the same counterfactual: causation
> is tested by the but-for test, and so, ultimately, is loss. Adopting
> some views non-but-for views about causation (e.g. NESS) requires or
> allows one to pull these questions apart. "Causation" can be satisfied
> without the but-for test being satisfied. Some would then say, in tort
> or contract, that there is no loss when the caused event would have
> happened anyway due to non-wrongful​ events, but there is loss when
> the caused event would have happened anyway due to wrongful events.
>
> It's not really clear, though, how to apply those ideas about loss in
> this insurance context. The UKSC here forbids the insurer's causation
> (and, implicitly, loss) counterfactual which posits that the impact on
> the business would have happened anyway but-for the Covid cases in a
> 25 mile radius. But it allows the insurer to deny loss by reference to
> the following counterfactual: what would have happened but-for the
> lockdown restrictions in that area? So if a restaurant would have had
> no income anyway, even without the restrictions, because it is a
> rubbish restaurant, then clearly there is no loss. So I wonder if
> there is any general principle that can be derived as to which
> counterfactuals are permitted and which forbidden. One thought is that
> a loss counterfactual is not permitted if it relies upon the
> occurrence of events that constitute the defendant's liability to the
> claimant or another person. But perhaps this ultimately just boils
> down the interpretation of the contracts.
>
> One other quick point. I'm not sure one ought without more to think of
> this as an application of NESS. That only follows if NESS is the only
> contender for analysing causation in cases when the but-for test is
> not satisfied. It isn't. At most, the result is consistent with NESS.
>
>
> All best
>
> Sandy
>
> -------------------------
>
> From: Adam Kramer <akramer@3vb.com>
> Sent: 18 January 2021 09:26
> To: Neil Foster <neil.foster@newcastle.edu.au>; obligations@uwo.ca
> <obligations@uwo.ca>
> Subject: Re: COVID, insurance and causation
>
> Thanks Neil.
>
> I was one of the FCA’s successful counsel team, so have lived this
> for nine months.
>
> The Supreme Court was persuaded that as a matter of proper
> construction of the policies, which are expressly triggered by
> notifiable diseases which is a small set of the more dangerous or
> infectious human diseases including SARS, they must have contemplated
> diseases going outside the relevant area and that the main route to
> interruption would be via public authority intervention responding to
> the disease.
>
> That being the case, the proximate cause test the parties would have
> intended to be required to be satisfied was satisfied by the link
> between the local occurrences and the national reaction (which Matt
> Hancock at one pojnt helpfully confirmed was a response to the cases
> all over the country), even if the but for test was not satisfied.
> I.e. the parties would not have intended the but for test to be
> applied to the local occurrences but only the larger set of which they
> comprise a part. Analogies were legal defence costs insurance
> (responds to cover legal expenses incurred for covered disputes even
> if also jointly incurred for uninsured disputes and so would have been
> incurred even but for the insured peril; SC jment 186-8), and the The
> Silversea C of A case (coverage for public actions responding to 9/11
> attacks does not require that the disruption is but for caused by the
> public actions where it was co-caused by the attacks themselves; SC
> jment 241).
>
> So yes, the result was a form of NESS I think—the ‘set’ was
> drawn by the policy, which must have contemplate that the insured
> peril (disease within the radius; or, in other clauses, public
> authority response to the disease) not compete with other consequences
> of the underlying fortuity (COVID-19 itself), meaning that they must
> be treated as a single set (terminology not used in the case).
>
> Also of interest is the overturning of Orient-Express (damage-related
> BI cover: but for the hurricane damage to the property, Hamblen J had
> found that the loss would still have been suffered due to the
> hurricane damage to the rest of New Orleans). Hamblen J was the judge
> in Orient-Express, Leggatt QC was arbitrator in Orient-Express, they
> both appeared in the Supreme Court in this case and graciously
> overruled themselves (SC jment 297-311), citing US judge Jackson:
>
> _“Precedent, however, is not lacking for ways by which a judge may
> recede from a prior opinion that has proven untenable and perhaps
> misled others. See Chief Justice Taney, License Cases, 5 How 504,
> recanting views he had pressed upon the Court as Attorney General of
> Maryland in Brown v Maryland, 12 Wheat 419. Baron Bramwell extricated
> himself from a somewhat similar embarrassment by saying, ‘The matter
> does not appear to me now as it appears to have appeared to me
> then.’ Andrew v Styrap, 26 LTR (NS) 704, 706. And Mr Justice Story,
> accounting for his contradiction of his own former opinion, quite
> properly put the matter: ‘My own error, however, can furnish no
> ground for its being adopted by this Court. ...’ United States v
> Gooding, 12 Wheat 460, 25 US 478. Perhaps Dr Johnson really went to
> the heart of the matter when he explained a blunder in his dictionary
> - ‘Ignorance, sir, ignorance.’ But an escape less
> self-depreciating was taken by Lord Westbury, who, it is said,
> rebuffed a barrister’s reliance upon an earlier opinion of his
> Lordship: ‘I can only say that I am amazed that a man of my
> intelligence should have been guilty of giving such an opinion.’ If
> there are other ways of gracefully and good naturedly surrendering
> former views to a better considered position, I invoke them all.”_
>
> Best,
>
> Adam Kramer
>
> From: Neil Foster <neil.foster@newcastle.edu.au>
> Date: Monday, 18 January 2021 at 06:09
> To: "obligations@uwo.ca" <obligations@uwo.ca>
> Subject: ODG: COVID, insurance and causation
>
> Dear Colleagues;
>
> I have been holding off posting about the decision of the UK Supreme
> Court in _The Financial Conduct Authority & Ors v Arch Insurance (UK)
> Ltd & Ors_ [2021] UKSC 1 (15 January 2021)
> _http://www.bailii.org/uk/cases/UKSC/2021/1.html _in the hope that
> someone else would dive into the shark-infested waters first! But
> since I see no takers let me venture in.
>
> The case is something of an “advisory opinion” being provided at
> the request of a government regulator and a number of insurance
> companies relating to the issues around whether “business
> interruption” insurance policies respond to the costs incurred by
> having to close down businesses due to the lockdown requirements
> imposed by the UK government. There is a lot here relating to
> insurance principles that I will not be commenting on. But I
> couldn’t ignore the detailed discussion of causation that the
> majority (LORD HAMBLEN AND LORD LEGGATT, with whom Lord Reed agrees)
> enters into.
>
> Now I want to acknowledge up front that the case does not directly
> concern causation as an element of the law of negligence. It is about
> “causation for insurance purposes”. The majority note that for
> insurance purposes the accepted approach is to ask whether there is
> “proximate causation” between the event and the policy (see eg
> [163]). But the comments on causation seem at least likely to be
> influential when a court has to come to explore liability issues in
> tort.
>
> The main issue seems to be this: the majority read the common form of
> business interruption clause in relation to “disease” as having
> the meaning that the clause will only respond to “the effects of
> cases of COVID-19 occurring within the specified radius of the insured
> premises” (at [161]), usually within a radius of 25 miles. The
> complaint is about the government shut-down rules, which of course
> affected the whole country. But when considering any one case of
> COVID-19, can it really be said this case was a cause of the shut-down
> rules? In other words, no individual example of the disease can be
> said to be a “but-for” cause of the government shut-down rules. As
> they say at [179]:
>
> “if - as the insurers submit - the relevant test in considering the
> Government measures taken in March 2020 is to ask whether the
> Government would have acted in the same way on the counterfactual
> assumption that there were no cases of COVID-19 within 25 miles of the
> policyholder’s premises but all the other cases elsewhere in the
> country had occurred as they in fact did, the answer must, in relation
> to any particular policy, be that it probably would have acted in the
> same way.”
>
> Hence the question was whether the specific instances covered by the
> clause, “caused” the damage.
>
> Again, keeping in mind that this was an insurance question not a
> liability question, the majority end up approaching the case through
> the lens of the various approaches that have been put forward dealing
> with “over-determined” causation- the classic example “one house
> hit by 2 fires each of which would have caused the harm”, or “one
> hunter hit by two bullets at the same time each of which would have
> killed him”- see [182] ff. They cite Professor Stapleton and
> Professor Wright- see [183]-[185], and [189].
>
> In the end I think the analysis they apply is in effect an example of
> the NESS approach, or the approach suggested by Prof Stapleton, if
> those two approaches are different. The example at [184] is I think
> instructive:
>
> “184. A hypothetical case adapted from an example given by Professor
> Stapleton, which was discussed in oral argument on these appeals,
> postulates 20 individuals who all combine to push a bus over a cliff.
> Assume it is shown that only, say, 13 or 14 people would have been
> needed to bring about that result. It could not then be said that the
> participation of any given individual was either necessary or
> sufficient to cause the destruction of the bus. Yet it seems
> appropriate to describe each person’s involvement as a cause of the
> loss. Treating the “but for” test as a minimum threshold which
> must always be crossed if X is to be regarded as a cause of Y would
> again lead to the absurd conclusion that no one’s actions caused the
> bus to be destroyed.”
>
> I think this is helpful because at one point it is accepted that the
> whole of Great Britain could be covered by about 20 circles of 25 mile
> radius. Let’s suppose business X in one of those circles, Y. Let’s
> further suppose that the government would not have introduced lockdown
> if only one circle had COVID-19, but it would do so if, say, 13
> circles did. Then to show that the  COVID in circle Y was a cause of
> the lockdown, under the NESS approach, all one need to do would be to
> show that circle Y was a necessary element of a sufficient set (12
> other circles and circle Y) which led to the lockdown.
>
> I think this works, though of course in a list which includes the
> relevant experts I am open to being corrected!
>
> Interested to hear other views, if any.
>
> Regards
>
> Neil
>
> NEIL FOSTER
>
> Associate Professor, Newcastle Law School
>
> College of Human and Social Futures
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