Stonegate settles Covid-BI case with insurers

UK-based hospitality group Stonegate has settled its disputed Covid-19-related business interruption (BI) claim with insurers ahead of its appeal, which was due to start today.

Fenchurch Law, which represented Stonegate, confirmed to Commercial Risk that it had settled with insurers Amlin, Zurich and Liberty. Terms of the settlement were not disclosed.

“The Stonegate appeal was due to start on 27 November 2023. However, as the market is now becoming aware, the Stonegate appeal will no longer be heard as the matter recently settled,” said Anthony McGeough, senior associate at Fenchurch Law.

“The Various Eateries appeal is still going ahead – as far as we are currently aware – on the same Marsh Resilience policy wording, which is another case heard alongside Stonegate last year and part of the same appeal hearing next week. The Court of Appeal’s judgment is unlikely to materialise until early next year,” he said.

The Stonegate case was one of a number of key coverage disputes winding their way through UK courts that would decide the degree to which policyholders could recover Covid-19-related BI losses from insurers under their property insurance.

The 2021 Supreme Court judgment in the Financial Conduct Authority (FCA) BI test case – which focused on small to medium-sized enterprises – was largely a victory for policyholders, although it left several significant loose ends. It also left insurers, policyholders and the courts to interpret and apply the Supreme Court ruling, often with very large claims at stake.

“While the FCA test case was an important step and a largely positive outcome for policyholders, it left the market with a lot of unanswered questions. This was to be expected given the broad range of representative policy wordings considered, and the focus on bringing as much clarity as possible in a remarkably short period of time. It simply would not have been possible to answer all of the further coverage issues we have since seen in the courts over the past year or two,” said McGeough.

“The Stonegate proceedings brought some much-needed clarity on some of the key issues arising out of this particular wording, which was widely used and affected a significant number of policyholders, including aggregation, causation post-policy period, additional increased cost of working, and government support,” he said.

The Court of Appeal had already refused permission to appeal the High Court’s findings on causation. Now that Stonegate has settled, both government support and additional increased cost of working are no longer live issues at this appeal hearing. However, furlough remains a live issue in other ongoing Covid-19 litigation, albeit on policy wording that is notably different to the Marsh Resilience wording, said McGeough.

“Aggregation, which is where policyholders may see the sums recoverable under the policy increase dramatically, is still being dealt with in some detail in the Various Eateries appeal. For example, the appeal will look at whether or not the wording provides cover on a per premises basis, and if there is separate occurrence on each renewal of government measures,” he said.