UK Law and Practice Contributed by: Daniel Robin and Chloe Franklin, SDV Fenchurch
pretation remain commonplace, recent years have seen a marked increase in claims arising from cyber incidents, systemic events, geopolitical instability, building safety issues and climate-related exposures. These losses frequently test policy wordings that were not originally drafted with such risks in mind. A notable feature of modern coverage disputes is the increasing tension between policyholders seeking cover for novel loss scenarios and insurers attempt- ing to define and limit their exposure through more detailed exclusions and coverage triggers. As a result, many disputes now focus less on whether a loss occurred and more on how it should be characterised for the purposes of the policy. Questions of causa- tion, aggregation, policy trigger and the interaction between different layers of insurance have therefore assumed increased significance. There are some areas of insurance that are prone to issues where there is not necessarily a binary answer. For example, in construction and property disputes, the issue as to whether something is merely defec- tive (which would not be covered by traditional CAR (Contractors All Risks) or material damage policies) or has suffered damage (which would be covered). Those types of disputes are capable of resolution pro- vided there is sensible engagement on both sides of the market. At the same time, there has been a growing willing- ness amongst policyholders to challenge declinatures and pursue coverage litigation. The substantial body of case law generated from COVID-19 business inter- ruption claims demonstrated both the willingness of policyholders to litigate and the courts’ preparedness to closely scrutinise insurer coverage positions. That trend has continued across other classes of business, particularly where systemic events affect large num- bers of insureds simultaneously. 4.2 Policy Wordings and Interpretation Developments English courts continue to approach insurance con- tracts as commercial agreements and apply conven- tional principles of contractual interpretation. The starting point remains the natural and ordinary mean- ing of the wording used, considered in the context of
the policy as a whole and against the relevant factual and commercial background. Recent decisions demonstrate the judiciary’s continu- ing reluctance to rewrite policies or depart from clear wording in pursuit of perceived commercial fairness. Consequently, policyholders and insurers increasingly devote significant attention to policy drafting at place- ment stage, recognising that even relatively minor dif- ferences in wording can produce materially different coverage outcomes. The trend towards highly tailored policy wordings has also contributed to increased litigation. Whilst bespoke drafting may provide greater certainty for particular risks, it can reduce the usefulness of earlier authorities and increase the likelihood that disputes will turn on the construction of unique contractual lan- guage. As a result, coverage litigation has become increasingly fact and wording specific. 4.3 Cyber and Technology-Related Coverage Issues Cyber remains one of the fastest-evolving areas of insurance litigation. Whilst ransomware incidents and data breaches continue to generate a significant vol- ume of claims, the market’s focus has increasingly shifted towards systemic technology failures capable of affecting numerous insureds simultaneously. One of the central issues emerging in coverage dis- putes is the distinction between malicious cyber- events and non-malicious technology failures. Large- scale outages have highlighted the potential for widespread business interruption losses arising not from cyber-attacks but from software failures, supplier errors or failures within critical digital infrastructure. These events have prompted insurers to review the scope of cyber cover and revisit exclusions designed to address systemic risk. There has also been increased attention on so-called “silent cyber” exposure. Insurers have invested con- siderable effort in clarifying whether cyber-related losses are intended to fall within traditional property, liability and financial lines policies. Whilst the market has made significant progress in introducing cyber- specific exclusions and endorsements, disputes
252 I NSURANCE L I T IGATI O N 2026
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