Judgment has been handed down by the High Court in London in three of what could be said to be the most important cases in the ongoing business interruption insurance battle since the FCA test case.

The Court has clarified key issues including liability, the treatment of government support and aggregation of losses under a common policy wording, known as the “Marsh Resilience” wording.

These cases may have significant impacts on this area.  Such is their importance that we will go into a more detailed analysis in subsequent articles.

Stonegate v MS Amlin

Stonegate sought to cover its losses totalling over £1 billion under its BII policy.  The insurers did not argue that the policies did not respond to Stonegate’s claim but contended that their liability was limited to £17.5 million – just over 2% of the total amount claimed.  The insurers also argued furlough payments and business rates support should be taken into account for the insurers’ benefit.

The Court held that:

• furlough and business rates relief could be deducted from a policyholder’s turnover when calculating losses.  This benefits insurers;
• the adoption of governmental measures which significantly affected whether, when and to what extent its pubs could open were individual loss events; but
• each government announcement on the pandemic did not constitute an event of loss where it merely reiterated existing rules or introduced "trivial changes."

Greggs v Zurich Insurance

Greggs sought to recover £150 million under its BII policy.  This case concerned aggregation of losses and the insurers argued that: the existence of COVID-19; the initial outbreak of COVID-19 in Wuhan; the emergence of COVID-19 globally or in the UK; or the coordinated government response, were one single event so only one loss occurred under the policy.

The Court held that:

• there was a single occurrence at the initial outbreak followed by separate occurrences when major restrictions in place were adjusted; and
• there were separate occurrences within each jurisdiction where there were local lockdowns or other restrictions were imposed – and therefore separate limits of indemnity available for each occurrence; but
• trivial changes did not provide additional limits.

Various Eateries v Allianz Insurance

Various Eateries claimed over £16 million arguing that there were multiple covered events and that all its pandemic-related loss was recoverable until the end of the 12- or 24-month Maximum Indemnity Period, even after the insurance policy had expired.

The Court held that:

• there were multiple covered events which could be dealt with differently under different insuring clauses; and
• losses which were proximately caused for a short time after expiration of the Period of Insurance might also be aggregated by reference to the introduction of the regional tier restrictions or the second lockdown.

Conclusion

After the FCA test case and subsequent cases on liability, the current cases inform the next stage of litigation in this area – calculation of losses.

Insurers may feel that their luck is changing after a recent series of policyholder-friendly judgments.  The decision to take furlough and business rates relief into account when calculating an indemnity is a major win for insurers and may significantly reduce liability.  However insurers should stay alert – it is understood that Stonegate are seeking to appeal the judgment.

This case may end up in the UK Supreme Court and be subject to policy considerations.  For example, notwithstanding the wording of policies, is it right that insures’ pay outs are reduced by the unprecedented support given to businesses by government?  Who should benefit from the “windfall” – the businesses who the payments were intended to support or insurance companies?

The Court’s clarification on how lockdowns were treated is welcomed and may offer policyholders some comfort.

These cases are detailed and cover technical areas of law.  We will be publishing articles on each case to more deeply explore these issues.

If you have any questions concerning the issues in this article or require further information, call 0345 241 5305 or complete the contact form found on this page.​​​​