Various Eateries -v- Allianz – Court of Appeal prevents access to a different outcome

Background

The Court of Appeal has handed down judgment in Various Eateries v Allianz, one of the trio of cases along with Stonegate Pub Co v MS Amlin & Ors and Greggs v Zurich heard before Mr Justice Butcher in June 2022. This group of cases, which considered issues arising out of the Marsh Resilience wording found by the FCA Test Case to respond in principle, proceeded by way of a determination of certain preliminary issues that included: (i) Trigger; (ii) Aggregation; (iii) Causation: additional Increased Costs of Working (“AICW”); and (iv) Government Support (“Stage 1”).

Following judgment in Stage 1 (our summary of the Stonegate proceedings can be found here), the policyholders and insurers in each action appealed various points on their respective judgments.

Grounds of appeal on key issues such as furlough and AICW ultimately did not end up before the Court of Appeal as the parties in Stonegate and Greggs settled their actions prior to the appeal hearing. The remaining grounds of appeal in dispute between Various Eateries and Allianz included certain aggregation issues and a short point of construction on the scope of the prevention of access and enforced closure clauses.

Following a two-day combined appeal hearing, the Court of Appeal dismissed all grounds of appeal, essentially leaving the parties in the position they were in following Mr Justice Butcher’s judgments in the underlying proceedings.

The key findings in Various Eateries at first instance

In the underlying proceedings Allianz argued that all BI losses suffered by Various Eateries should be aggregated to single sub-limit by reference to a “single occurrence” to which all losses connected. Allianz put forward a number of potential “single occurrence” candidates, including an emergence event in Wuhan, and the arrival of Covid-19 in the UK. Various Eateries sought to persuade the court that there should be no aggregation, or that aggregation should only be applied on a per premises basis (i.e. there would be a separate sub-limit for each premises).

Ultimately the lower court rejected the parties’ primary cases, and found instead that BI losses should aggregate by reference to various Government actions, which meant that there were multiple sub-limits that applied to the business as a whole (not on a per premises basis). The judge also rejected Various Eateries’ argument that the various reviews and renewals of certain Government actions should be separate aggregating occurrences (and therefore attract additional sub-limits).

Aggregation

On appeal Allianz sought to revive an argument that there was a single occurrence in Wuhan to which all BI losses should aggregate on the basis that the judge found in Stonegate and Greggs that the initial animal to human infection(s) could constitute a single occurrence, but was then wrong to decide that it was too remote. Allianz also submitted that if the “initial outbreak” in Wuhan was something more widespread than the initial animal to human infection(s) there were still events in Wuhan that qualified as a single occurrence.

Allianz also maintained an alternative argument that the introduction of Covid-19 into the UK also qualified as a single occurrence, even if it could not be specifically identified, and that this single occurrence was “in connection with” the BI losses within the meaning of the relatively loose causal language of the policy wording.

The Court of Appeal held that the trial judge was entitled to reach the conclusions that he reached at trial following detailed and fully considered arguments on the events in Wuhan, and accordingly there was no error principle or other comparable error that would entitle the Court of Appeal to interfere.

In respect of the introduction of Covid-19 into the UK, the Court of Appeal departed from the trial judge’s findings and considered that there was a sufficient causal connection between the arrival of Covid-19 in the UK and the BI losses suffered by Various Eateries that would satisfy the weak causal link required by the wording. However, the Court of Appeal also found that the judge was entitled to have reached the conclusion that the introduction of Covid-19 in the UK was too remote on the basis that the first introduction was temporarily too remote from the losses, and the losses depended on the spread of the disease within the UK which was by no means certain.

Various Eateries sought to revive its case that if the BI losses fall to be aggregated, then it should be on a per premises basis, as the triggers for cover under the wording were expressed by reference to an “Insured Location”.

The Court of Appeal found that the Judge was right to have dismissed the per premises argument for the reasons given in the underlying proceedings. There was nothing within the wording that suggested that aggregation was intended to operate on a per “Insured Location” basis, which was further confirmed by (i) the definition of the “Insured’s Business”, which was defined as “Operating a chain of Italian restaurants” i.e. the business as a whole; and (ii) the Retention provision, which made clear that a Single Business Interruption Loss may affect multiple Insured Locations. Notably, the Court of Appeal distinguished Corbin & King & Ors v Axa from the present proceedings.

The Court of Appeal refused permission to appeal Various Eateries’ alternative argument that a decision to renew, change or relax a Government measure should also count as a single occurrence and therefore attract a separate sub-limit. However, the Court of Appeal did note that its analysis of the March 2020 regulations, which applied for 6 months unless revoked, may well have been different had the regulations applied for a specified period after which they were renewed by a positive decision to do so.

The Construction Point

Allianz also challenged the trial judge’s decision on the scope of cover under the Prevention of Access and Enforced Closure clauses. In summary, Allianz argued that the effect of the words (during the Period of Insurance” meant that it is only losses suffered during the policy period which would be covered, and losses which fell outside the policy period would not be.

The Court of Appeal agreed with the judge in the underlying proceedings, finding that VE was “entitled to recover the Business Interruption Loss proximately caused by that Covered Event, even if that loss extends beyond the Period of Insurance” subject to the longstop of the maximum indemnity period, based on an analysis of the definitions of “Indemnity Period” and “Reduction in Turnover” – “Reading these definitions together with the Insuring Clauses, Allianz agrees to pay the Business Interruption Loss proximately caused by a Covered Event which occurs during the Period of Insurance. The Business Insurance Loss which it agrees to pay is the Reduction in Turnover caused by the Covered Event, beginning on the date of the Covered Event and continuing for a maximum of 12 (or 24) months. Necessarily, therefore, the losses which VE is entitled to recover may continue beyond the end of the Period of Insurance”.

Comment

The Court of Appeal’s judgment, despite leaving matters as they were on the Marsh Resilience wording following the first instance decisions in Stonegate, Various Eateries and Greggs, is a positive outcome for policyholders. Had Allianz been successful on its primary arguments, it would have left policyholders on this wording with a single sub-limit in circumstances where most have claims significantly in excess.

The key points to take away for those with ongoing claims on the Marsh Resilience wording are:

1. Policyholders are still able to claim multiple sub-limits by reference to various Government action.

The full range of the relevant Government actions that attract a separate sub-limit under the Marsh Resilience wording is yet to be tested by the court, and will be fact dependent on the industry in question.

2. Policyholders with “composite” policies may still argue that there are separate sub-limits per separate company;
3. The attribution of losses to specific occurrences has yet to be tested, and is likely to be a time consuming forensic exercise;
4. Similarly, in respect of AICW, the question of what qualifies as economic or uneconomic remains unanswered;
5. Furlough remains to be accounted for in the adjustment process.

It is worth noting for those on different wordings that furlough is still a live issue for the insurance market. It was considered in the recent group of cases before Mr Justice Jacobs in the commercial court as one of a number of preliminary issues arising out of disputes with Liberty Mutual and Allianz, Fenchurch Law represents Hollywood Bowl and International Entertainment Holdings in those proceedings. Judgment is currently awaited.

The full judgment from the Court of Appeal can be found here.

Anthony McGeough is a Senior Associate at Fenchurch Law.