Judgment handed down in three Covid business interruption claims. Did insurers or policyholders win the battle?
On Monday the commercial court handed down judgments in the cases of Stonegate -v- Amlin (Stonegate), Various Eateries -v- Allianz (VE), and Greggs -v- Zurich (Greggs), involving business interruption Covid-related claims. All three cases related to issues of coverage on the ‘Marsh Resilience Form’, that is an ‘off the peg’ wording which was offered to the market by at least 11 insurers.
The three cases raised some of the same issues and, whilst the claims were not consolidated and each trial was separate, the court ordered that the trials of certain common or overlapping issues in the three actions should be heard in sequence before Mr Justice Butcher. Stonegate was heard first in June 2022, with further written submissions ordered by 25 July 2022, followed by VE from 11–14 July 2022, and finally Greggs from 18–19 July 2022, with further written submissions ordered by 29 July 2022.
The preliminary issues dealt with in these cases concerned some significant points left unresolved by the supreme court and the FCA test case – see our previous article.
Those preliminary issues included aggregation, the application of the supreme court ruling on causation in the FCA test case and whether government support, such as furlough payments and Business Rates relief, should be taken into account.
The Stonegate judgement, unsurprisingly having been heard first, is the longest judgment, running to 66 pages, with VE’s and Greggs’ judgments being much shorter with references to the findings set out in the Stonegate judgment. The judgments in the three cases can be found below:
Findings in favour of policyholders
Whilst the insurers in all three cases accepted that the policyholders were covered for business interruption, the insurers essentially sought to argue that their liability was limited as the losses occurred as a result of one single occurrence of business interruption and, therefore, the claims were subject to one limit under the policies. On the other hand the policyholders’ position was essentially that each change to the restrictions triggered a separate occurrence and the limits under the policies applied to each occurrence.
In Stonegate, the court rejected insurers’ argument that it was appropriate to aggregate all losses throughout the pandemic to a single occurrence of the origins of the pandemic, eg, the outbreak in China, and, applying the causation analysis in the FCA test case, rejected insurers’ arguments that all losses could be aggregated to any one occurrence of the disease.
In Greggs, insurers’ initial argument that there was only one limit under the policy available for Covid business interruption losses, entitling Greggs to only one limit of £2.5 million , was rejected by the court.
In VE, insurers argued that the policy was only triggered by a Covid event when there had been interruption or interference with VE’s business as a whole, and so there was only one trigger of the disease clause by reason of the spread of the pandemic. This was rejected by the court.
However, in all three cases, whilst the court found that the policyholders’ losses did not aggregate around one single occurrence, the claims under the policies were limited to a relatively small number of occurrences and, therefore, limits.
Findings in favour of insurers
There were some significant findings in favour of insurers in all three cases which, in summary, were:
- the Judge adopted a narrower approach to causation of losses than advocated for by the policyholders;
- the Judge concluded that credit needed to be given by policyholders for furlough payments received; and
- the Judge concluded that credit may need to be given by policyholders in relation to Business Rates relief, but that depends, to a certain extent, on the nature of the accounting treatment of such relief.
So there were findings both for and against both policyholders and insurers, with both arguing that they have come out on top! Stonegate have already reportedly said that it intends to appeal some findings and, no doubt, the insurers will be considering an appeal as well. Watch this space!
For further information on these recent judgements or for any other insurance related queries, please contact a member of the insurance team at BDB Pitmans.