Policyholders suffer key defeat in Allianz appeal victory

The UK Court of Appeal this week handed down judgment in Various Eateries Trading Ltd v Allianz Insurance Plc, in a case that lawyers are describing as a significant victory for insurers in the ongoing struggle to claim for business interruption losses caused by lockdowns during the Covid-19 crisis. The appeal and cross-appeal were from one of three cases – the other two being Greggs v Zurich and Stonegate v Amlin, both of which settled before the appeal – the first in which the court had conducted a full analysis of questions of aggregation in the context of the Covid-19-related losses. Charles Dougherty KC and Timothy Killen of 2TG acted for Allianz, instructed by a team led by James Deacon at DAC Beachcroft LLP, and said that the Court of Appeal judgment contains the most comprehensive treatment by the courts to date on the role of remoteness in the context of aggregation. The barristers explained that this latest decision, along with the Greggs and Stonegate cases, addressed issues of causation, limits and aggregation as they related to the widely used “Marsh Resilience” wording (or “RSA 4 wording” as it was referred to in the Financial Conduct Authority’s test case). Various Eateries claimed for an indemnity under their policy (underwritten by Allianz) for significant trading losses said to have been caused as a result of the Covid-19 pandemic. The aggregating language in the policy provided that all business interruption (BI) losses were to be aggregated where the amounts payable “arise from, are attributable to or are in connection with a single occurrence”. “Language such as this, which combined wide-linking language (‘in connection with’) with the requirement for a ‘single occurrence’ (as opposed to an ‘originating cause’ or the like) had not previously been considered by the Courts. Various Eateries claimed there was no aggregation under the policy because there was/were no ‘single occurrence(s)’ with which the loss claimed was connected,” explained the 2TG team. “Various Eateries ran an alternative case that, to the extent there was aggregation, it applied to each of its insured locations separately (as opposed to across all of its businesses as a whole). Allianz’s primary case on aggregation was that all of Various Eateries’ BI loss suffered as a result of the Covid-19 pandemic were to be aggregated as a single limit, either with reference to an event concerning the emergence of the SARS-CoV-2 virus in Wuhan, or its arrival in the United Kingdom,” they said. Allianz’s alternative case was that aggregation was to be applied with reference to government action. Various Eateries also ran an alternative government-action aggregation case, but argued for a greater number of limits based on reviews and renewals of certain action. At first instance, High Court judge Butcher J rejected Various Eateries’ primary case that there was no aggregation. He also rejected Allianz’s primary case that there was a “single occurrence” with which all of Various Eateries’ loss was connected. He found essentially that while the initial transmission(s) of the disease from animals to humans in Wuhan, China did amount to a single occurrence with which all of Various Eateries’ loss was connected, it was too remote to be an aggregating event, explained the barristers. The judge also dismissed Allianz’s case that the first introduction of the virus to the UK was a relevant aggregating single occurrence, on grounds that there was no single introduction of Covid-19 to the UK, and that the epidemic within the UK could not be said to be “connected with” any one such introduction (and that this too would in any event have been too remote). “The judge instead found that Various Eateries’ losses aggregated with reference to various pieces of government action (and in doing so, rejected Various Eateries’ case on this that each time government action was reviewed or relaxed, there was a new aggregating single occurrence). The judge also rejected Various Eateries’ case that aggregation was to be applied to each premises separately, on grounds that the aggregating language did not support an application on a per-premises basis,” said the barristers. Allianz appealed on the basis of its primary aggregation case, and Various Eateries appealed the dismissal of its “per premises” aggregation case. Allianz also appealed the interpretation of the Prevention of Access and enforced closure covers concerning the period for which such cover was granted. Various Eateries sought permission to appeal on its case that renewals and relaxations amounted to separate aggregating events, and also on the question of whether in each case where there was a loss there would always be a “single occurrence”. Both appeals were allowed by the judge. The Court of Appeal dismissed both parties’ appeals, and refused Various Eateries’ applications for permission to appeal. “In doing so, however, Males LJ partly departed from the findings that Butcher J made at first instance on aggregation and indicated that, while the judge at first instance was entitled to reach the conclusions that he did, he would have found that the introduction of Covid-19 to the UK was a single occurrence with which all of Various Eateries’ loss was ‘connected’,” explained the barristers who represented Allianz. He would, however, have still considered that this single occurrence was “too remote” to operate as an aggregating single occurrence. In reaching this conclusion, and in finding also that the initial human infection(s) in Wuhan were too remote to be an aggregating single occurrence, Males LJ gave specific and extensive consideration to the role that remoteness plays in the context of aggregation. The 2TG team explained that, in short, the judge held that: Whether and to what extent remoteness applies depends upon the true construction of the aggregation clause in question. It is an aspect of causation that needs to be considered as a result of the connecting or causation language in each case; The application of the remoteness principle therefore depends on the nature and strength (or weakness) of the causal link that the aggregation clause requires; Remoteness is ultimately a legal tool that may be employed in a variety of circumstances, including where there is only one candidate-unifying event, and where there are several. In each case, the search is for the (or a) significant or relevant event, or for an event which provides a meaningful explanation for the loss; The analysis has to be carried out as an exercise of judgment, which is to some extent intuitive, but which also requires analysis of all of the relevant circumstances of the case; and, The nature of the exercise required is such that an appellate court should not interfere with the trial judge’s evaluation of the circumstances unless the conclusion reached is plainly wrong, in the sense that it was not reasonably open to the trial judge or that the judgment discloses some error of principle. The DAC Beachcroft team added that, while both appeals were dismissed, the outcome of the claim is one that is far more favourable to insurers than policyholders. “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,” they concluded.

Policyholders suffer key defeat in Allianz appeal victory

Decision clarifies remoteness under aggregation debate

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