Greggs has won an initial case against insurer Zurich over its claims for business interruption during the Covid-19 lockdown, in a decision that has far-reaching implications for the treatment of aggregate pandemic losses in other cases.
Insurers had initially contended Greggs could only claim for a single occurrence under its policy, which would mean applying a £2.5m limit to all of its business insurance losses caused by the Covid lockdown. Greggs, however, argued it was entitled to access a separate limit of £2.5m each time the UK and devolved governments adopted new Covid restrictions affecting its business.
In a judgment handed down on Monday 17 October, a judge accepted the main points of Greggs’ case and ruled there was a single occurrence at the outset of the pandemic restrictions, from March 2020 to May 2020, followed by separate occurrences in each jurisdiction in the UK as the levels of restrictions were adjusted over the year. He also ruled there were separate occurrences within each jurisdiction where local lockdowns or other restrictions had been imposed.
Subject to appeal, the case will now move to phase two, in which insurers and Greggs will calculate the value of the business interruption loss recoverable under the bakery’s policy.
In June, Greggs increased its claim against Zurich from an initial £100m to £150m. Greggs said it had 1,778 insured locations in England, a further 157 in Wales, 279 in Scotland and 21 in Northern Ireland, arguing each of these locations had suffered business interruption losses to some extent. Greggs was claiming £726,220 for additional increased cost of working, and a further £600,000 for claims preparation and public relations crisis management costs.
The judgment was released in tandem with another on the Stonegate Pub Company case, in which the pub company pursued MS Amlin, Zurich and Liberty Mutual for £1.1bn in the High Court. Stonegate claimed it was entitled to a separate insurance limit for each of its 760 individual venues. It argued during the trial the experience of each venue was unique, depending on its characteristics and the nature of varying local Covid-19 restrictions.
On the key battlegrounds of furlough – where the insurers asked for the benefit of state support that a policyholder has received to be deducted when deciding how much to pay businesses – and aggregation, the ruling “came down substantially in favour of insurers”, but Stonegate said it would appeal elements of the ruling.
A Stonegate spokesman said:
“The outcome of this case is far from conclusive. We are pleased the judge found in our favour on a number of key issues and note he sided with our insurers on others. In this sense, the outcome is similar to the judgment of the divisional court in the test case brought by the Financial Conduct Authority last year.
However, we believe the court’s interpretation on a number of issues which are generally applicable to policyholders is out of step with the approach taken by the Supreme Court in the test case and with the approach of courts in other jurisdictions (such as on furlough).
We intend to appeal those elements of the decision. While our recovery from the pandemic has been strong, we cannot ignore the significant disruption caused during the last two years and, along with most businesses in the UK, we are now grappling with inflationary challenges and a cost-of-living crisis for the UK consumer. In the circumstances, we, and other businesses, are entitled to look to our insurers to provide the cover promised under our policy.”
Various Eateries, which owns the Strada restaurant chain and the Coppa Club, filed a £16.3m lawsuit against its insurer Allianz in a dispute over its business interruption policy. Various Eateries claimed each business interruption at its ten premises “gave rise to multiple triggers of the disease clause (and therefore multiple covered events)”.
Night Time Industries Association chief executive Michael Kill said:
“Today’s ruling [on state support] sets a dangerous precedent, which will resonate in frustration and anger across the hospitality and night-time economy sectors. Many will be aggrieved to see insurers, who have placed so many in financial ruin over the Business Interruption challenge, wrongly being allowed to consider deducting the state support that a paid policy holder has received when deciding what to pay the businesses. Confidence is at an all-time low between the sectors, and feel strongly alongside the industry that this decision is unjust, but raises questions on whether these deductions should be returned to the state.