Various Eateries had cover for losses suffered as a result of interference with its business as a consequence of COVID-19 (and associated restrictions) occurring prior to 29 September 2020. Multiple restaurants operated across England were impacted by public apprehension about the disease, combined with a range of Government restrictions, ranging from non-binding Government advice through to legally binding lockdown and other measures.
Various Eateries' policy applied a single limit of £2.5m to all losses which arise out of, are attributable to or are in connection with a single 'occurrence'.
The Commercial Court had handed down judgment in October 2022, alongside two linked claims (Stonegate Pub Ltd v MS Amlin and Greggs Plc v Zurich Insurance) in a judgment which was seen as largely favourable to insurers as only a small number of aggregating occurrences were identified to which separate limits of liability would be applied. Both Various Eateries and Allianz appealed against the Court's decision.
Aggregation Issues
The key issue in dispute was whether, at one end of the spectrum, Various Eateries should benefit from a separate limit of liability every time the Government not only imposed a restriction, but also reviewed, relaxed or renewed such restrictions and for each and every premises out of which it operated its restaurants; or whether, at the other end of the spectrum, all of Various Eateries losses should be subject to one single limit.
When considering whether losses could be said to be 'in connection with' any single 'occurrence', it was not in dispute that an 'occurrence' generally means something which happens at a particular time, at a particular place and in a particular way. But, the context of the policy in which that word is being used may be relevant to what sorts of events could constitute an 'occurrence'.
The Court of Appeal agreed with the trial judge that for losses to be 'in connection with' an occurrence, they do not have to be proximately caused by the occurrence. A weak or loose causal connection is sufficient. Thus, both the Commercial Court and Court of Appeal felt that the initial human infection(s) in the Huanan Seafood Wholesale Market in Wuhan (viewed as the place where the novel coronavirus first emerged) constituted a single occurrence which was connected with Various Eateries losses.
The Court of Appeal disagreed with the trial judge's finding that the introduction of COVID-19 into the UK was not also a single occurrence. It did not see why this should not be capable of qualifying as a single occurrence, even if a considerable number of infected individuals had arrived in the country at much the same time. Even though there was no continuous chain of infection between the first cases of disease in the UK and all the other cases thereafter which brought about Government measures, a reasonable policyholder would not have regarded the need for a continuous infection chain as relevant and would have viewed its losses as being connected with that initial introduction of the virus.
However, this alone was not sufficient to cap the totality of Various Eateries' losses at one single limit of £2.5m. The principle of remoteness can be used to sift relevant events from irrelevant events, when identifying whether any particular occurrence amounts to an aggregating occurrence.
Lord Justice Males identified the following four principles as applicable to the remoteness test:
a. First, whether and to what extent the remoteness principle applies depends on the correct interpretation of the aggregation clause in question. The remoteness principle is an aspect of causation which needs to be considered in the context of the overall causal link identified in the clause; for example the words “arising out of” would necessarily involve a significant causal link between the loss and the occurrence out of which it arises.
b. Second, the application of the remoteness principle depends on the nature and strength (or weakness) of the causal link which the aggregation clause requires. The linking words “in connection with” may not necessarily imply the need for a causal link when taken on their own, but do so when read in conjunction with the words “arising from” and “attributable to”, which also appeared in the policy. So, whilst there needs to be a causal link of some kind between the occurrence and the loss, since it is looser than that required in 'arising out of' language, the principle of remoteness in the Marsh Resilience Policy should apply with less rigour, or greater flexibility, than equivalent clauses requiring losses to 'arise out of' a particular occurrence.
c. Third, remoteness is ultimately a “legal tool” which may be employed in a variety of circumstances. It may need to be considered, not only when there is only one candidate for the unifying occurrence, in order to determine whether that event is too remote, but also when there are several candidates. In either case, the search is for the (or a) significant or relevant event, or for an event which provides a meaningful explanation for the loss; these are all synonyms which express the same concept. They are not, however, to be equated with the proximate or effective cause. That is particularly so in a case where only a relatively weak causal link is required, otherwise one would be introducing a strict requirement of proximate cause by the back door.
d. Fourth, the analysis calls for an exercise of judgement which is to some extent intuitive, but which also requires analysis of all the relevant circumstances of the case, including the nature of the causal link required by the aggregation clause. The analysis also includes consideration of the unities of time and place, so that an event which is far separate from the loss in time or place is more likely to be too remote than one which is contemporaneous with or geographically closer to the loss in question. Similarly, where the occurrence of the loss depends on a series of contingencies which may or may not occur after the happening of the event, that may also suggest that the occurrence in question is too remote, i.e. that in all the circumstances it does not provide a meaningful explanation for the loss. But these are guidelines, rather than rules set in stone.
Applying these principles, the Court of Appeal determined that the emergence of the virus in Wuhan was too remote from the losses to be an aggregating occurrence. It also found that the introduction of the virus into the UK in January 2020 was too remote, as it was temporally remote from Various Eateries' losses (which had not started to be suffered until late February 2020) and it was by no means certain (even looking at the position in late March) that the introduction of the virus into the UK would bring about an epidemic causing the Government to intervene in the way that it did.
So, the Court of Appeal dismissed Allianz' appeal, leaving intact the trial judge's conclusion that there were a very small number of aggregating occurrences, synonymous with major government restrictions, since that provided the most meaningful explanation for Various Eateries' losses.
But, in doing so, the Court left open the possibility that losses suffered before any Government action at all might be connected with the initial introduction of the disease and subject to one single limit.
It also dismissed Various Eateries' appeal. In doing so, it said that the judge was clearly right that it should not benefit from a separate £2.5m limit across the summer of 2020 (after the first lockdown had been lifted, but whilst some more relaxed measures remained in place such as on the size of gatherings which could meet and ongoing social distancing requirements).
Importantly, the Court of Appeal also roundly dismissed Various Eateries' argument that each separate restaurant premises should benefit from its own limit per Government action. The Policy covered losses suffered as a result of interference with Various Eateries' business as a whole and policy limits applied per 'occurrence' not per premises. In a further favourable development for insurers, the Court of Appeal noted that the Commercial Court decision in Corbin & King v AXA (which had determined that policyholders under the wording at play in that case benefitted from separate limits per premises) could be distinguished; the material distinction being that in that case, each restaurant was said to have been owned by a different company, each of which was separately insured under the policy. Whilst the aggregating language in Corbin & King was different, the impression given is that the decision on policy limits in that case is likely to be confined to its own facts, turning on the composite insurance point.
Conclusion
While both appeals were dismissed, the outcome of the claim is one which is far more favourable to insurers than policyholders.
The Court of Appeal's comments, both in respect of losses occurring before any Government action (where the possibility is left open that a single limit may apply) and in respect of losses occurring over the summer of 2020, provides further clarity for insurers and policyholders alike.
For Various Eateries (whose period of insurance expired on 28 September 2020), all of the losses it incurred across a six month period between March and September 2020 should be capped at a single limit, before separate limits are applied to meaningful Government decisions thereafter (such as the 10pm restaurant closure restriction of 24 September 2020).
A significant element of the insurance industry's exposure under the Marsh Resilience policy wording is likely to sit across this period of time, so the outcome of the Various Eateries' appeal is likely to be seen as favourable to insurers. That is particularly so when viewed against the Commercial Court's findings on causation in the same case (in relation to which the Court of Appeal had earlier refused Various Eateries permission to appeal), which further curtails the length of time across which policyholders can seek to claim losses.
James Deacon, Matthew Dalley and Hannah Stanford of DAC Beachcroft were instructed by Allianz to represent it in the appeal.
