Covid Business Interruption Claims ' The Next Instalment

• Published date: 24 October 2022
• Subject Matter: Insurance, Coronavirus (COVID-19), Insurance Laws and Products, Insurance Claims
• Law Firm: Herbert Smith Freehills
• Author: Mr Paul Lewis, Sarah Irons and Sarah Mccadden

Business interruption (BI) losses in the context of the COVID-19 pandemic have been considered in three recent judgments of Butcher J:

• Stonegate Pub Company v MS Amlin [2022] EWHC 2548 (Comm) (Stonegate)
• Greggs PLC v Zurich Insurance PLC [2002] EWHC 2545 (Comm) (Greggs)
• Various Eateries Trading Ltd v Allianz [2022] EWHC 2549 (Comm) (Various Eateries)

The judgments will be an important reference point for policyholders looking at seeking multiple limits; cover for the entirety of their indemnity period; and whether any government support received by the insured should be taken into account, for the insurers' benefit, when calculating any sums recoverable.

All three cases concerned policies written on the Marsh Resilience wording. Each trial was separate and the parties in the different actions were represented by largely different teams. However, as the three cases dealt with common and overlapping issues, they were managed in a co-ordinated way, including being heard in sequence before the same judge. Butcher J handed down judgment following preliminary issues hearings in all three cases.

BACKGROUND

The COVID-19 pandemic and ensuing government restrictions on people's movements and businesses brought significant loss of revenue to business across the UK. The Financial Conduct Authority (FCA) test case (FCA v Arch [2020] EWHC Comm 2448, and [2021] UKSC 1) considered what cover there may be under various non-damage business interruption extensions for such losses. Following the FCA test case, where this firm acted for the FCA on behalf of policyholders (see our blog posts on the High Court and Supreme Court decisions), further cases have been commenced in the courts seeking in many cases multiple limits of liability.

The claimants in the three cases before Butcher J (Stonegate, Greggs and Various Eateries) all operated in the hospitality industry and had various locations across the UK. Their policies were all on the same Marsh Resilience wording, which was materially the same as one of the wordings considered as part of the FCA test case (known as RSA4) although the insurers were not the same on each policy.

In each case, insurers did not dispute that the relevant policy had been triggered or that the relevant claimant had suffered business interruption losses (BIL). The dispute related to the extent of coverage and, in particular, whether the losses claimed constituted a "Single Business Interruption Loss" and should be aggregated.

The preliminary issues hearings in all three cases proceeded on the basis of agreed and assumed facts in order to be determined on an expedited basis. Butcher J was, however, provided with expert evidence in the disciplines of virology and epidemiology.

There were five preliminary issues determined in the Stonegate case which were, to a large extent, mirrored in Greggs and Various Eateries. The decision in Stonegate (which determined all of the issues) is set out below and any additional points argued or determined in Greggs and Various Eateries have been added where appropriate. The issues were:

1. The Trigger Issue: What was the trigger or Covered Event for the relevant insuring clauses of the Policy?
2. The Aggregation Issue: Can the claimed losses be aggregated in respect of single occurrences and, if so, what were those occurrences?
3. The Causation Issue: To what extent are the claimed losses proximately caused by relevant events in the Policy Period?
4. The Additional Increased Cost of Working Issue: Is the limit for "Additional Increased Cost of Working" (AICW) '15 million in the aggregate or for each "Single Business Interruption Loss", and does it apply to economic or only uneconomic "Increased Cost of Working" (ICW)?
5. The Government Support Issue: Are payments received by the insured under the Coronavirus Job Retention Scheme (also known as 'furlough') (CJRS) or business rates relief (BRR) to be taken into account in calculating sums recoverable under the policy?

DECISIONS

The Trigger Issue

The parties in Stonegate disagreed as to the relevance...