A luxury resort in Phuket can claim insurance payouts for losses arising from Covid-19-related lockdowns after the Singapore High Court ruled that the resort's commercial insurers' policies should cover these losses.

In what is believed to be the first such ruling here on the interpretation of business interruption clauses in the context of the pandemic, Justice Pang Khang Chau found that QBE Insurance (Singapore) and MS First Capital Insurance are liable to indemnify the owner of Le Meridien Phuket Beach Resort for losses after it closed on April 7, 2020, on order of the Thai authorities.

On April 2, 2020, the governor of Phuket ordered the closure of all hotels on the island because of the rising number of Covid-19 cases. Le Meridien Phuket also had a confirmed Covid-19 case involving an employee who lived on the hotel's premises from March 24 until he was quarantined in a hospital on March 26.

The defendants have appealed against the ruling.

Le Meridien Phuket is owned by Relax Beach, an entity owned by the family of Singapore businessman Peter Fu, who is also head of investment holding firm Kuo International.

According to Relax Beach, which is represented by Senior Counsel Siraj Omar of Drew & Napier, QBE and MS First Capital had agreed to provide insurance coverage for business interruption losses suffered by its properties, including Le Meridien Phuket, as a result of certain events set out in the policy. This included the resort's closure as a result of the outbreak of an infectious disease.

On April 3, 2020, Relax Beach notified QBE's Thai associate, KWG Insurance, that it intended to make a business interruption claim. It did so on May 26 that year, but was rejected by the defendants on May 29 on the basis that the business interruption cover required an outbreak of Covid-19 at the hotel.

Relax Beach sued the insurers in Singapore in March last year, alleging, among other things, that the requirements for making its claim had been satisfied as one of its hotel employees was a confirmed Covid-19 case.

The suit was filed in Singapore because the insurance policy was issued in Singapore and Singapore courts have jurisdiction.

It said it had complied with all of its obligations under the policy, which required the resort's owner to notify the insurers of the closure.

But QBE and MS First Capital disagreed. In court documents, they argued that in order for liability to be triggered under the policy, there must have been an outbreak of the pandemic at the hotel.

They also claimed there was no evidence that the Thai authorities had specifically considered the confirmed Covid-19 case at the resort when issuing the islandwide closure order.

Furthermore, the insurers claimed that Relax Beach had failed to notify the insurers about its infected employee or provide details of its losses, and this amounted to a breach of its obligations under the policy.

But the High Court rejected some of these claims in a judgment issued in March this year.

It found that the confirmed case at the resort was likely one of the many factors contributing to the closure order, which in turn meant that liability under the policy was triggered, Mr Siraj said.

When contacted yesterday, QBE and MS First Capital, which are being represented by Mr Edric Pan, deputy managing partner of Dentons Rodyk, said: "Insurers were successful in their defence of part of the originating summons, and are appealing parts on which we were not successful at first instance."

Separately, QBE was among insurers that had appealed against a London High Court ruling that found they should honour most claims for losses caused by Covid-19-related lockdowns.

The UK's Financial Conduct Authority brought a closely watched test case on behalf of 370,000 policyholders in June 2020, paving the way for an estimated 1.2 billion pounds (S$2.07 billion) in claims, according to a Reuters report.

QBE was among six of the world's largest insurers that had argued many business interruption policies did not cover widespread disruption following the UK government's efforts to curb the virus from March 2020, the report said.

But in January last year, the UK Supreme Court unanimously dismissed appeals by the insurers after scrutinising non-damage insurance policy clauses, which cover disease, denial of access to business premises and hybrid clauses, the report said.

The UK Supreme Court ruled that "business interruption" policies provided cover against the pandemic and government lockdown measures.