The issue of business interruption losses as a result of COVID-19 has already been heavily litigated in the English courts. During the course of 2020, the Financial Conduct Authority (FCA) ran a test case against a number of insurers (The Financial Conduct Authority v Arch Insurance (UK) Ltd and others  EWHC 2448 (Comm)) in order to obtain clarity on business interruption claims under a number of different insurance policies. The decisions relating to a number of those policies were appealed to the Supreme Court (The Financial Conduct Authority v Arch Insurance (UK) Ltd and others  UKSC 1), which made further positive findings in relation to cover and provided a historic ruling on causation.
One policy considered by the Divisional Court was the Marsh Resilience wording (known as 'RSA4' in the FCA test case). The Divisional Court found that there was cover under three different clauses of the policy, and this decision was not appealed to the Supreme Court by the insurers.
Subsequently, queries arose as to the application of the Supreme Court's judgment to potential claims for multiple government restrictions or multiple locations. Early decisions on these issues included those of Corbin and King Ltd v AXA Insurance UK Plc  EWHC 409 (Comm) and the China Taiping arbitration.
Questions also arose as to the application of the Supreme Court's judgment to the Marsh Resilience wording to issues that had not been considered (wholly or partly) by the Supreme Court, including aggregation and post-policy period losses. Three separate claims were therefore brought during the course of 2021 in order to obtain clarification from the Court: Stonegate Pub Company Limited v MS Amlin Corporate Member Limited and others  EWHC 2548 (Comm); Various Eateries Trading Limited ((formerly known as Strada Trading Limited) v Allianz Insurance plc  EWHC 2549 (Comm) and Greggs plc v Zurich Insurance plc  EWHC 2545 (Comm).
Following several case management conferences, the claims fell to be case managed by Mr Justice Butcher. He confirmed that the claims would be heard separately but managed in a coordinated way. Trials of preliminary issues in the claims were heard sequentially in June and July 2022. Permission was granted for written submissions to be filed on issues raised in the later hearings that may have impacted the earlier claims.
Various Eateries Claim
Mishcon de Reya LLP, Leigh-Ann Mulcahy KC and Max Evans (both of Fountain Court) represented Various Eateries Trading Limited in the second claim to be heard.
The main issues in dispute in that claim were as follows:
- The correct interpretation of what constitutes a 'Covered Event' under the 'Disease Clause' e.g. whether each instance of a person having COVID-19 in the 'Vicinity' was a separate 'Covered Event'.
- The correct interpretation of the 'Enforced Closure' and 'Prevention of Access' ("PoA") clauses e.g. whether each action of the UK government constituted a separate 'Covered Event'; and whether this applied per Venue.
- The correct interpretation of 'Covered Event' generally and when the Indemnity Period began.
- Whether there was cover for losses occurring after the end of the Policy Period but during the Maximum Indemnity Period. If so, what was the correct test as to causation of those losses.
- The interpretation of the Limits of Liability, 'Single Business Interruption Loss' ("SBIL") and the phrase "in connection with".
- Whether a 'single occurrence' could be identified which was in connection with all of the losses i.e. whether there was a 'single occurrence' around which all of the losses aggregated. If not, whether there were multiple relevant 'single occurrences', and what those where.
Various Eateries Judgment
The judgments in all three claims were handed down simultaneously on 17 October 2022. Due to the overlapping nature of certain elements of the claims, the three judgments cross-refer to each other. The key findings in the Various Eateries judgment are as follows:
||Under the 'Disease Clause', Mr Justice Butcher found that the Supreme Court's interpretation of 'occurrence' in relation to RSA 3 was also applicable to the Marsh Resilience wording. He therefore found that 'occurrence' "meant something which happened at a particular time, in a particular place and in a particular way, and that a disease which spread, or an outbreak of the disease – unless it had sufficient unity of time, locality and cause – could not be called an ‘occurrence’". Mr Justice Butcher also found that the Supreme Court's reasoning was applicable to the Marsh Resilience wording in that "a Notifiable Disease should be considered to ‘occur’ when illness is sustained by an individual, and that it will ‘occur’ as often as there are cases of illness. Further the fact that a disease may be deemed notifiable from its initial outbreak does not itself indicate what is to be regarded as an occurrence of the disease".
||In response to Allianz's contention that disease only 'occurred' within the 'Vicinity' when it was transmitted between people in the 'Vicinity', Mr Justice Butcher found that "the disease must be regarded as ‘occurring’ each time it was contracted within the Vicinity, which will have involved a transmission within the Vicinity, and also each time someone with the disease entered the Vicinity".
||In relation to the 'Enforced Closure Clause', Mr Justice Butcher held that "there were two Covered Events per Venue, and a total of 20. There were two because there was the enforced closure during the first national lockdown between 20 March and 3 July 2020 and from 24 September 2020, when there was early closure of restaurants (initially at 10pm)". The clause applied 'per Venue' because the relevant trigger "is the actual closure of all or part of an Insured Location under relevant compulsion or instruction. On this basis, the Policy is ‘triggered’ in respect of each such closure, and the number of ‘triggers’ is the number of Insured Locations so closed" (Paragraph 68 of the Stonegate Judgment) .
||In respect of the 'PoA Clause', Mr Justice Butcher confirmed that paragraphs 70 – 73 of his judgment in the Stonegate claim were also applicable i.e. that the Covered Event is "the actions of the relevant authority, if they prevent or hinder the use or access to one or more Insured Locations". The number of 'triggers' (which Mr Justice Butcher concluded meant "the occurrence of insured perils" for these purposes) "is properly regarded as the number of such actions or advices", but is not multiplied by the number of premises. A new Covered Event also only occurs where "there were materially different restrictions imposed or advised by government or a relevant agency which prevented or hindered the use of or access" i.e. not where the steps taken or advice "merely repeated or renewed an existing prevention or hindrance of access".
|31 and 32
||"The number of Covered Events must be judged by reference to the substance, not to the form or precise mode of promulgation or communication, of the relevant actions or advice." For example, Lockdown 1 should not be regarded as having separate Covered Events in respect of closure, stay at home/work from home and social distancing. Mr Justice Butcher noted that there would have been several Covered Events under the PoA Clause, but further submissions may be needed to identify each.
|33 and 34
||The Covered Event is "the matters set out in clauses 2.3(viii) and (xii) [of the Policy] even if they predate the interruption to or interference with the Insured’s business which results from such matters".
||"…the Period of Indemnity starts with the commencement of the interruption or interference which results from the Covered Event" (i.e. not the actual commencement of the Covered Event where it predates the interruption or interference with the Insured's business).
||The parties had agreed that "…whether BIL after the Period of Insurance can be recovered depends on whether it was proximately caused by Covered Events within the Period of Insurance".
|46 to 62
In relation to the disease clause, "(1) the decisions in the FCA Test Case do not establish that all cases of Covid-19, whenever occurring, were equal concurrent causes of the governmental actions and public response at any given time; (2) the fact that the cases of the disease occurring in the Period of Insurance may have caused the later cases of the disease (because ‘cases make cases’) is not sufficient to say that the cases of the disease in the Period of Insurance were the proximate cause of governmental measures and public response after the Period of Insurance; and (3) the ‘death blow’ or ‘grip of the peril’ principle is inapplicable". This does not mean that "Covered Events, namely cases of disease occurring in the Vicinity in the Period of Insurance, could not have been the proximate cause of any interruption or interference after the Period of Insurance", but "such causation would need to be demonstrated". Specifically to Various Eateries' claim, cases within the Policy Period were only proximate causes of the Governmental responses occurring "a short period after" the end of the Policy Period because that was the most up to date information on which decisions were made and people remained infectious for up to 14 days. Cases within the Policy Period were therefore an equal and proximate cause of the tier system introduced on 14 October 2020, but not the movement of certain areas into tier 2 on 29 October 2020 or the third lockdown which came into force on 5 November 2020.
Covered cases within the Policy Period may also proximately cause interruption or interference with a business after the Policy Period in certain circumstances, but this would need to be proven e.g. if people were required to continue to self-isolate / were suffering from 'Long Covid'.
|67 and 70 to 73
In relation to PoA and Enforced Closure Clauses, there is a Covered Event when there is an enforced closure of / actions or advice preventing or hindering access to an Insured Location within the Period of Insurance. "There could then be recovery for the resulting interruption and interference with the business, and the extent of that interruption or interference would depend on how long the closure lasted, irrespective of whether the whole period of such closure was within or after the Period of Insurance." This is the case even when the closure or prevention / hindrance lasts for a considerable time "if the closure or prevention/hindrance remained in substance the same, and it continued to be a proximate cause of loss, then it is covered as long as it lasts". To assess whether the closure or prevention/hindrance is in substance the same, you should consider "(i) the terms and purpose of the original and later orders, actions or advice; (ii) the legal origin of any powers exercised by the relevant authority in making or giving such orders, actions, or advice; (iii) the reasons why any later order, action or advice was made or given and whether they were the same or different from those which prompted the original order, action or advice; and (iv) the identity of the authority/ies concerned". The application of the test is fact specific. Various Eateries does not, however, have cover for the 'hospitality curfew' introduced between 2 December 2002 and 26 December 2020 because it was not simply a continuance of the 24 September 2020 to 4 November 2020 'hospitality curfew', which was on different terms.
||In relation to aggregation, Mr Justice Butcher confirmed that paragraphs 78 – 90 and 101 – 116 of the Stonegate judgment were also applicable to Various Eateries. In those paragraphs, Mr Justice Butcher confirmed that "the Limits of Liability were on the amounts recoverable in respect of the losses to Stonegate’s business as a whole, and in the absence of any words to that effect, cannot be read as applying per premises". In relation to the terms 'in connection with', 'arising from' and 'attributable to', particularly 'in connection with' only requires a "relatively weak causal linkage. The words used do not require that the occurrence be the proximate, or sole, or main cause of the losses, and could embrace indirect causation", but there must be some causal connection.
|92 to 102
In respect of what constituted a relevant 'single occurrence' for the purposes of aggregation:
All of the 'Business Interruption Loss' ("BIL") claimed by VE is "in connection with" (i) the mutation or set of mutations of the progenitor virus; (ii) the MRCA of SARS CoV-2; (iii) the infection with a genomic sequence equal to the earliest Lineage B SARS-CoV-2 cases or (if different) the MRCA of all Lineage B cases; (iv) the infection with a genomic sequence equal to the earliest Lineage B.1 SARS-CoV-2 cases or (if different) the MRCA of all Lineage B.1 cases; (v) the first human-to-human transmission of SARS-CoV-2; (vi) the first "relevant" human-to-human transmission of SARS-CoV-2; and (vii) the initial outbreak of COVID-19 in Wuhan in November/December 2019. None, however, amount to a 'single occurrence' because they are too remote to be regarded as a relevant occurrence for the purpose of the SBIL.
As regards (viii) the first transmission of COVID-19 within England; (ix) the first transmission of COVID-19 within the UK; (x) the initial introduction of COVID-19 within England; and (xi) the initial introduction of COVID-19 within the UK, these did not have a sufficient causal relationship with VE’s losses and are all too remote from the losses.
As regards (xii) the initial outbreak of COVID-19 within England; and (xiii) the initial outbreak of COVID-19 within the UK, these were not a 'single occurrence', did not have a sufficient causal relationship with VE’s losses and are all too remote from the losses.
A Consequentials Hearing has been listed for 21 November 2022 to resolve any outstanding disputes and to provide further clarity for policyholders with the Marsh Resilience wording in relation to any claims that they may have for multiple triggers of loss under their policy.
In the event that you have a Marsh Resilience policy wording and would like to explore the scope for potential further claims, please contact Sonia Campbell or Sophie Fairclough at Mishcon de Reya LLP.