By Lucia Osborne-Crowley

Law360, London (June 4, 2021, 1:33 PM BST) -- A student travel company is suing Zurich PLC for £10 million ($14 million) after the insurer refused to pay out on claims for canceled holidays amid the COVID-19 pandemic.

World Challenge Expeditions Ltd., which arranges adventure trips for school students, told the High Court in a May 24 claim that has now been made public that Zurich Insurance breached its contract when it failed to cover £10 million in losses that the company suffered during the coronavirus outbreak.

The travel company canceled its first trips that were scheduled to take place in or near Wuhan, China, in January 2020 and continued to cancel expeditions for most of the year, according to the claim.

World Challenge told the court that events outside its control — such as a global pandemic — are covered by the cancellation clauses in the policy it took out with Zurich. But, when it came time to claim back the £10 million that World Challenge had to pay to refund students, the insurer would not cough up, according to the suit.

The travel company argued that Zurich had covered it for similar losses, such as medical events outside the company's control, in previous years. Zurich had also paid out claims on similar cancellation losses in 2020 that were not connected to COVID-19, the claim says.

That established a pattern that gave World Challenger the impression that similar problems with business interruption would also be covered by its policy, the suit argues.

World Challenger also noted that it was explicit with Zurich that cancellation coverage was important to the company.

"World challenger sought express confirmation from the defendant that the defendant would continue to indemnify the claimant for the amount of the deposit which the claimant was obliged, upon cancellation, to refund to challengers," the lawsuit argues.

The insurer initially provided assurances that it would cover the COVID-19 losses but then later changed its position, the travel company told the court.

World Challenger is asking the court for damages to cover the £10 million in losses it sustained.

The two sides did not immediately respond to requests for comment on Friday.

The lawsuit comes after a landmark U.K. Supreme Court ruling on whether insurers should cover businesses for losses arising from the first COVID-19 lockdowns in 2020. The Financial Conduct Authority took insurers to court, claiming they were improperly rejecting business interruption claims.

The Supreme Court upheld the High Court's ruling that went largely in favor of policyholders. The highest court found in January that insurers should pay out if the "occurrence" of COVID-19 within the vicinity was a cause of business interruption losses.

The hotels and travel industry has been hit particularly hard by COVID-19 insurance losses. A London judge recently dismissed a five-star hotel's lawsuit seeking to force Travelers Insurance to pay its £250,000 business interruption claim after being forced to close during the pandemic. 

Zurich Insurance said in February that the huge claims it faced in travel, event cancellation and business interruption insurance connected to the pandemic led to a 73% slide in profits.

World Challenge Expeditions Ltd. is represented by Daniel Shapiro QC of Crown Office Chambers, instructed by Fenchurch Law Ltd.

Counsel information for Zurich was not immediately available.

The case is World Challenge Expeditions Ltd. v. Zurich Insurance PLC, case number CL-2021-000322 in the commercial court of the High Court of Justice of England and Wales.

--Additional reporting by Martin Croucher and Najiyya Budaly. Editing by Ed Harris.

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