Further clarification of the cover afforded for business interruption (BI) losses arising out of the COVID-19 pandemic is expected following a series of preliminary issues hearings which recently took place before the English Commercial Court. The issues to be addressed include the important question of whether, BI losses should be aggregated for the purposes of relevant liability limits and if so, how.
A number of judgments have already addressed issues concerning COVID-19 related BI losses, including the Divisional and Supreme Court's judgments in the FCA Test Case and the High Court's decision in Corbin & King Limited & Ors v Axa Insurance UK Plc (2022). Together these decisions examined whether conditions necessary to trigger cover under the relevant policies had been triggered, as well as questions of causation and loss. They have been extremely helpful in clarifying what a policyholder can, in principle, recover. Nevertheless, important questions still remain.
In particular, one of the key remaining battlegrounds between policyholders and insurers is the question of whether losses suffered by policyholders at different business locations over different periods of time should be aggregated, with the result that only a single policy sub-limit should apply; or whether policyholders can claim multiple sub-limits on a per restriction and/or per location basis.
These points were central to three recent cases, case-managed in a coordinated way by the Commercial Court, with all three cases being heard consecutively by Mr Justice Butcher between 13 June and 19 July 2022.
The three cases, brought separately by Stonegate Pub Company, the largest pub company in the UK; bakery chain Greggs PLC; and Various Eateries, owner of the Strada, Coppa Club and Tavolino brands (for which this firm acts), all concern the interpretation of the Marsh Resilience (RSA4) wording.
Another key issue involves the extent to which there is cover for business interruption losses following expiry of the relevant policy periods but within the maximum indemnity periods. In this regard, the legal test for causation and its application are also issues that will be determined by the Court.
The insurers in each of the three cases claim that the COVID-19 pandemic constituted a single occurrence and that all BI losses suffered by the policyholders during the entire COVID-19 outbreak in the UK must be aggregated and are subject to a single limit of liability. Conversely, the policyholders argue that losses should not be aggregated. They contend that in the context of a global pandemic, with an array of Government responses and restrictions being implemented at different times, there is no sufficiently unifying single occurrence from which all BI losses arise.
Although each of the three BI claims will turn on its own facts, the ubiquity of the policy wording in these three cases means that the Commercial Court's judgments remain eagerly anticipated by numerous policyholders and insurers alike.