Another success for policyholders in the latest Covid-19 Business Interruption litigation

On 26 January 2024, Mr Justice Jacobs handed down judgment in the latest Covid-19 Business Interruption case of Gatwick Investment Ltd and Others v Liberty Mutual Insurance Europe SE [2024] EWHC 124 (Comm). The case considered a number of preliminary issues in claims under Business Interruption insurance policies brought by a number of different claimants against various insurers. In each case, the Claimants claimed under the Non-Damage Denial of Access (“NDDA”) clause. This blog summarises the key points to take away from the judgment.

Background

By way of reminder, an NDDA clause is one which provides coverage to an insured where use of the insured premises is prevented or hindered as a consequence of action by a relevant authority. NDDA clauses were one of the three broad types of clauses considered in the FCA Test case, and the Divisional Court held that this type of clause would not respond to losses suffered as a result of Covid-19. However, on analysis of the disease wordings, the Supreme Court held that each case of Covid-19 was an equally and effective cause of the action by the relevant authority, and it was this causation analysis which the policyholders sought to apply to the NDDA clauses in question.

Coverage

On coverage, the court had to first consider whether the alleged interferences with each of the Claimants’ businesses arose in consequence of “action by the police or other Statutory Authority”. The judge dealt with this point swiftly, rejecting insurers position, and confirming that the Covid-19 regulations were a paradigm example of “action by the police of other Statutory Authority”. The judge also noted that this point had been dealt with in previous Covid-19 Business Interruption litigation, such as the FCA Test Case and Corbin & King.

On causation, it was also accepted by insurers prior to the hearing that the argument that the Supreme Court’s concurrent causation argument did not apply to NDDA clauses such as the one in question was not realistically open to insurers at first instance (as the point had already been decided against them in previous litigation). Insurers, therefore, ultimately accepted that they would not be successful on this point and, instead, were granted permission to appeal at a later date.

Limits

On limits, the court had to consider whether the policyholders (who all operated multiple premises) were entitled to multiple limits of indemnity on a per restriction, per premises basis, or whether there was an aggregate limit which applied to all claims under the clause, irrespective of the number of restrictions or premises. As each of the policyholders had slightly different policy wordings, the judge came to slightly different conclusions on each, as follows:

• In Gatwick, where the relevant premises were each owned or managed by a separate company which was insured under a separate policy of insurance, the judge held that the insurer was bound to indemnify each Claimant in respect of each of the premises up to a maximum amount of £1million on the basis set out in the definition of “Limit of Indemnity” i.e. on an “any one occurrence” basis.
• In Starboard, which was a composite policy, the judge held that the £1million limit applied separately in respect of each individual contract between the Claimant and the Defendant because the policy was a composite policy and, accordingly, there were separate contracts of insurance between the Defendant and each Claimant. As a result, the judge held that the insurer was bound to indemnify each Claimant up to a maximum amount of £1million on the basis set out in the definition of “Limit of Indemnity” i.e. on an “any one occurrence” basis.
• In Fuller and Hollywood Bowl, where there was one policy covering the insured and its many premises, the judge held that the indemnity was capped at £1million. This was because the judge disagreed with policyholders that there was any real distinction between “Limit”, “limits” and “Limit of Indemnity” and the “Limit” of £1million should therefore be read as meaning £1million for “any loss or series of losses arising from any one occurrence”. The judge did, however, find that the “Limit” was an “any one occurrence” limit and not a £1million limit in the annual aggregate (as the policy worked on a scheme of per occurrence aggregation). The Claimants were not, therefore, entitled to a £1million limit per premises but were entitled to separate limits per occurrence.

For the avoidance of doubt, the court did not rule on the number of relevant occurrences in any of the cases, and instead held that this was to be determined at a later date.

Furlough

On furlough, the court followed the decision of Mr Justice Butcher in Stonegate and held that insurers were entitled to deduct the furlough payments that the policyholder had received in the relevant period from the indemnities paid under the policy as the payments had reduced the costs to the business. The judge noted that a concurrent causation analysis applied to furlough payments (rather than a stricter approach, as the policyholders had argued) and insurers therefore succeeded in establishing that furlough payments were received “in consequence of the insured peril”.

Commentary

The judgment in Gatwick Investment Ltd and Others v Liberty Mutual Insurance Europe SE is the latest in the ongoing Covid-19 Business Interruption litigation and provides further clarity on a number of issues, including the applicability of the Supreme Court’s FCA Test Case analysis on causation. Permission to appeal has, however, been granted on the causation and furlough issues and it is, therefore, unlikely to be the last time that these issues will be argued before the court.

If you have any queries in relation to this judgment, or consider that you have a claim which you think should be pursued as a result of it, please contact Roger Franklin or Lauren Murphy of our Insurance Litigation team and we can advise on your available options.