High Court issues further guidance on aggregation and government support in relation to COVID business interruption claims

On 17 October 2022, the High Court ruled in Stonegate Pub Co. Ltd. V MS Amlin Corporate Member Ltd and others, Greggs PLC v Zurich Insurance PLC, and Various Eateries Trading Ltd. V Allianz Insurance PLC that insurers can deduct the value of COVID furlough support given to a policyholder from their business interruption claims. The insurers’ argument on the issue of aggregation was rejected.

The Claims

Stonegate Pub Co, owner of 760 pubs and restaurants, brought a claim for £845 million against three insurers claiming that their business interruption policy had been triggered several times during the pandemic.

Each case looked at the wording of the Marsh Resilience policy:

“In the event of interruption or interference to the Insured’s Business as a result of:

viii. Notifiable Diseases & Other Incidents:

• discovered at an Insured Location;
• attributable to food or beverages supplied at or from the Insured Locations;
• which are reasonably likely to result from an organism discovered at an Insured Location; and/or
• occurring within the Vicinity of an Insured Location,
• during the Period of Insurance…
• within the Territorial Limits, the Insurer agrees to pay the Insured the resulting Business Interruption Loss.” (Emphasis added).

The court focussed on the issue of aggregation. Under the policy, a limit of liability was given for all business interruption losses that “arise from, are attributable to or are in connection with a single occurrence”. Insurers argued that the COVID pandemic amounted to a “single occurrence” and, therefore, to only one instance of loss of £2.5million which has already been paid out. Stonegate contended that there were instead multiple occurrences in the vicinity of each of their business locations which amounted to multiple instances of business interruption loss.

The claim also focussed on whether insurers could deduct the value of COVID furlough support given by the government to policyholders from their business interruption claims.

The claims brought by Greggs, and by Various Eateries Trading, covered similar issues.

The Decision

The High Court issued a mixed ruling in favour of the insurers.

On the issue of aggregation, a middle ground was found between the insurers’ argument for one instance of business interruption loss and the policyholders’ argument for multiple instances. It was held that a small number of government measures could each amount to a “single occurrence”. For example, the order for hospitality business closure on 20 March 2020, the restrictions imposed on hospitality businesses on 24 September 2020, and the various national and regional lockdowns were each held to be a “single occurrence” amounting to a business interruption loss.

It was also ruled that the value of the government’s COVID support scheme can be deducted from business interruption claims. Judge Butcher stated, “If a third party has made a payment which has eliminated or reduced the loss to the insured against which it had insurance, then, subject to the exception below, the insurers are entitled to the benefit of that payment either in reducing any payment that they might have to make under the policy or, if they have already paid, by claiming the amount from the insured”.

Comment

The decision is a positive one for insurers who will be required to pay out for only a small number of occurrences of loss and will benefit from deducting the value of furlough support from business interruption claims. Nonetheless, this case was decided upon interpretation of particular wording within the policies and is therefore fact specific. Examples of a “single occurrence” given in the judgment were not definitive, and it is understood that Stonegate are to appeal against certain aspects of the ruling, stating the outcome was “far from conclusive”.