High Court rules on Covid business interruption insurance preliminary issues

A High Court judge ruled today (17 October) in three connected cases, giving guidance on the number of insured incidents of business interruptions caused by the Covid-19 pandemic. The cases are being brought by Stonegate, the UK’s largest pub company, bakery chain Greggs and restaurant group Various Eateries Trading, formerly known as Strada Trading. The companies are in dispute with their various insurers, which include Amlin, Liberty Mutual, Zurich and Allianz. While the litigation covers various complicated points about the business interruption insurance, at its simplest the insurers argue that there were only a few “triggers” leading to insurable incidents, while the insured argue that there are many by multiplying the interruptions by the locations affected. The difference of interpretation has a huge effect on the amount that can be claimed. Stonegate, for example, which had 760 pubs during the pandemic, is claiming more than £1bn, while its insurers say the losses should be limited to either £2.5m or around £15m. The judge who heard all the cases, Mr Justice Butcher, ruled on the main issue in the Stonegate case and found that the answer was less simple than either of the parties contended. “I do not consider that the number of ‘triggers’ is the number of such advices [to close] multiplied by the number of premises, as Stonegate contends,” he said in paragraph 72 of the ruling. “The wording of the clause indicates that there will be a covered event if there is advice or actions from a relevant authority which prevents or hinders the use of or access to ‘insured locations’. “While, in accordance with general condition 7(ii), the plural will include the singular, it is nevertheless the case that the clause provides that particular actions or advice by a relevant authority, though affecting more than one insured location, will constitute ‘prevention of access’. “In those circumstances, the number of covered events under sub-clause (xii) should be regarded as the number of advices or actions rather than that number multiplied by the number of the insured locations to which those advices or actions relate.” He broadened out his analysis to take account of the other actions. “I should also add that, in keeping with the submission of Allianz in the VE Action, I consider that the number of covered events would be the number of occasions on which there were materially different restrictions imposed or advised by government or a relevant agency which prevented or hindered the use of or access to ‘insured locations’,” he wrote. “Steps taken or advice given by government or a relevant agency which merely repeated or renewed an existing prevention or hindrance of access would, in my view, form part of one set of ‘actions or advice’, and thus constitute one covered event.” He said he would not rule on the specific number of covered events at this point. The principles underpinning business interruption insurance were cemented by a fast-tracked lawsuit brought by business regulator the Financial Conduct Authority (Financial Conduct Authority v Arch Insurance Ltd and others [2021] UKSC 1; [2021] EGLR 12). In the litigation, the High Court and the Supreme Court broadly backed most of the points brought by lawyers representing policyholders. Stonegate Pub Company Ltd v (1) Ms Amlin Corporate Member Ltd (2) Liberty Mutual Insurance Europe SE (3) Zurich Insurance plc Various Eateries Trading Ltd (formerly known as Strada Trading Ltd) v Allianz Insurance plc Greggs plc v Zurich Insurance plc Commercial Court (Mr Justice Butcher) 17 Oct 2022 Photo © Alex Lentati/LNP/Shutterstock