Court of Appeal clarifies aggregation clauses in business interruption insurance amidst COVID-19 pandemic in Various Eateries Trading Ltd v Allianz Insurance Plc [2024] EWCA Civ 10

Citation: [2024] EWCA Civ 10
Judgment on

Introduction

In the case of Various Eateries Trading Limited v Allianz Insurance Plc ([2024] EWCA Civ 10), the Court of Appeal (Civil Division) grappled with issues concerning business interruption insurance in the context of the COVID-19 pandemic. This complex litigation involved the interpretation of an insurance policy’s aggregation clause within the Marsh Resilience Form, notably how multiple losses could be aggregated as arising from a single occurrence, limiting the liability of the insurer.

Key Facts

Various Eateries Trading Ltd (VE) operated a chain of restaurants and claimed to have incurred over £16 million in business interruption losses due to reduced trade and eventual closure amidst the pandemic. These losses were insured by Allianz. The case examined preliminary issues regarding policy coverage, principally focusing on the effects of the aggregation clause, which permitted the aggregation of losses that occur from, are attributable to, or are in connection with a single occurrence. Allianz argued that all of VE’s losses were connected to the initial outbreak of COVID-19 in Wuhan, China, thus limiting its liability to £2.5 million—a sum already paid.

The trial examined several potential ‘occurrences’, including the initial outbreak in Wuhan, introductions of COVID-19 in the UK, governmental actions in response to the spread, and renewals and relaxations of government measures. VE additionally claimed that if aggregation applied, it should be calculated for each insured location separately.

The appeal considered the principles governing aggregation clauses in insurance policies, including the requirements for what can be deemed a ‘single occurrence’ from which losses arise and the absence of remoteness. The court emphasized the necessity of a significant causal link, observing that a weaker causal relationship would, in principle, allow for limitless tracing back to the causes of causes, thus blurring the lines of aggregation and undermining the function of the clause.

The principles established in Caudle v Sharp and elaborated in Scott v Copenhagen Re were brought to bear on the current case. Specifically, these principles elucidate that remoteness serves as a legal tool to separate relevant from irrelevant causes. Furthermore, the standard imposed by these cases suggests that, while the causal link envisaged by an aggregation clause does not equate to proximate causation, it must be sufficiently significant to prevent the aggregation of losses that bear only a weak or loose connection to the occurrence.

In the context of VE’s claim, the court ultimately held that the initial human infections in Wuhan did not have a sufficient causal relationship nor were they significantly connected to the losses suffered. Furthermore, the introduction of COVID-19 into the UK was not a single occurrence but rather stemmed from a multitude of independent transmission lineages.

The ruling also addressed the question of whether losses caused by government-mandated closures subsequent to policy expiration were recoverable. The court decided affirmatively, interpreting “during the Period of Insurance” as the inception of the event causing business interruption and not a cut-off date for recoverable losses.

Outcomes

The Court of Appeal upheld the conclusion that Allianz’s contention of VE’s losses being connected to the initial outbreak in Wuhan was too remote. It was also determined that losses can be aggregated by reference to multiple government actions considered single occurrences, though not every minor change or relaxation qualified as such.

The court rejected the submission that aggregation should be applied per insured location, indicating that aggregation could reasonably apply when an occurrence affects multiple locations. Furthermore, permission to appeal was refused on issues that held no practical significance, reflecting a reluctance to meddle with trial judges’ evaluative conclusions sans errors in principle.

Conclusion

The Court of Appeal’s decision in Various Eateries Trading Limited v Allianz Insurance Plc provides clarity on how aggregation clauses are to be applied in business interruption claims arising from widespread and prolonged events such as pandemics. The case underscores the significance of considering the actual wording of insurance policies, the need for a significant causal link when applying aggregation clauses, and the context within which occurrences are to be contemplated. Moreover, the ruling clarifies that enforced closure or prevention of access clauses encompass the initiation of interference without precluding recovery for subsequent loss extending past the insurance period.