Implementing an aggregation clause in a business interruption insurance policy depends on its construction and establishing a causal link between the unifying factor and the losses which is not too remote.
The Court of Appeal has dismissed an appeal from a decision concerning an aggregation clause in Various Eateries Trading Limited (formerly known as Strada Trading Limited) v Allianz Insurance PLC [2024] EWCA Civ 10.
At the relevant time VE, a chain of Italian restaurants under various brands, operated 10 insured venues in London and South East England.
These venues were affected by the pandemic due to reduced customer footfall and subsequently because of the government restrictions. VE claimed for its losses under an insurance policy with Allianz for the period 29 September 2019 to 28 September 2020.
The total estimated annual insured profit for business interruption was £48,668,887 with limits for notifiable diseases of £2,500,000 and prevention of access of £500,000 where all business interruption loss, costs and expenses were attributable to or in connection with a single occurrence.
Where more than one clause applied the largest limit of liability applied. Allianz accepted that VE was entitled to claim for its losses following Financial Conduct Authority v Arch Insurance (UK) Ltd [2021] UKSC 1, but contended that its liability was limited to £2,500,000.
The judge found that the initial human infection in Wuhan could be described as a single occurrence with a sufficient causal connection to satisfy the requirements of the aggregation clause but this was too remote from VE’s losses to be relevant.
However, the government’s decision to instruct people to avoid social venues on 16 March 2020 was a relevant single occurrence, as was the enforced closure of restaurants from 20 March 2020 and the implementation of early closing and other restrictions on restaurants from 24 September 2020.
Renewal, immaterial changes or relaxation of these measures were not separate occurrences. The policy did not justify aggregation on an insured location basis.
The Court of Appeal agreed. The explanation for VE’s losses was not the initial human infection but the later government response.
The initial introduction of Covid-19 into the UK could be a single occurrence with a causal link to all cases which led, via the government’s response and public reaction, to VEs losses.
However, the judge was entitled to conclude that that first introduction was temporally remote from the losses. The losses depended on the spread of the disease to the extent that the government intervened in the way it did. This was by no means certain to have happened.
Louise Clark is a property law consultant and mediator
