No limits to creative interpretation? Thoughts on Various Eateries and Gatwick Investment

Mark Pring, partner at Reed Smith, takes a deep dive into two of the most recent UK rulings in the Covid-19 BI litigation saga and questions whether the cases could trigger a wave of disputes from insurers looking to apply the decisions unwarrantedly…

There appears to be no let-up in the stream of Covid-related insurance judgments handed down by the English courts.

Two recent decisions (one from the Court of Appeal) highlight ongoing areas of tension and the differing treatment of key words such as “occurrence” and “incident” in different circumstances by reference to specific policy language.

Various Eateries

At first instance in Various Eateries Trading Ltd v Allianz Insurance Plc[2024], Mr Justice Butcher decided back in October 2022 that the interpretation and application of significantly broad “aggregating” language in the relevant policies was nonetheless a balancing act.

At issue (alongside disputes relating to causation and “limits” language) was how business interruption losses were to be aggregated where the amounts payable “arise from, are attributable to or are in connection with a single occurrence”.

Allianz contended that the emergence of Covid-19 in Wuhan, China, or if not its introduction into the UK, could be an occurrence for this purpose. The judge considered, however, that such a concept was too “remote” to justify aggregation even under such broad policy language.

In January 2024, the Court of Appeal found in favour of the application of the “remoteness” principle to balance in practice the potential ramifications of aggregating language. Put starkly, it recognised that, while the global emergence of Covid-19 (or its introduction into the UK) could be an “occurrence” to which all losses claimed might then be aggregated, justice required a causal connection – between occurrence and loss – that could not be too remote. Allianz’s chosen occurrence was too remote.

Equally, the courts recognised that the balancing act cuts both ways.

Various Eateries had propounded a “per premises” argument that there should be no aggregation because there was no “single occurrence” connected with the loss; alternatively, to the extent there was necessary, the language applied to each insured location separately, not across all business operations.

This was rejected by both courts. Some concrete meaning had to be given to the broad aggregation language and a balancing exercise ultimately justified finding that certain instances of UK government action in response to Covid-19 were in each case an aggregating event.

Gatwick Investment

It is nonetheless notable that some insurers have sought to draw wider lessons from the Court of Appeal’s specific approach to aggregating language. In practice, we have seen instances of insurers seeking directly to apply the aggregation decision in Various Eateries to how language such as “incident of loss” should be analysed when identifying limits of liability under an insuring clause.

In fact, the treatment of such limits in different policies has been considered (among many other matters) in the recent, lengthy judgment of Mr Justice Jacobs in Gatwick Investment Ltd v Liberty Mutual Insurance[2024].

One policy underwritten by Allianz contained a “denial of access endanger life or property” clause (S/30/1):

Any claim resulting from interruption of or interference with the business as a direct result of an incident likely to endanger human life or property within one mile radius of the premises in consequence of which access to or use of the premises is prevented or hindered by any policing authority, but excluding any occurrence where the duration of such prevention or hindrance of us[e] is less than four hours, shall be understood to be loss resulting from damage to property used by the Insured at the premises provided that:

(i) The maximum indemnity period is limited to three months, and

(ii) The liability of the insurer for any one claim in the aggregate during any one period of insurance shall not exceed £500,000.”[bolding added]

Significantly, the judge found that the loss suffered at each relevant property constituted a separate “incident of loss”, consistent with the analysis in the earlier, important decision in Corbin & King.

The policyholders were therefore entitled to a separate limit of indemnity per premises, rather than (more narrowly) a separate limit of indemnity per claimant: “the ability to claim in respect of the closure of each theatre depends upon the ability of the relevant claimant to prove an ‘incident’ within the one-mile radius of each theatre. Self-evidently, the incident which may permit a claim in Manchester will not be the same incident as that which will permit a claim in Oxford”.

The judge focused on the closure of each premises as a result of an occurrence, following now relatively established case law that for this type of policy an “occurrence” has to be something that happens at a particular time and in a particular place, and in a particular way. He also attached significance to previous case law establishing that, where premises were in different locations, they could well be differently affected by a “danger” triggering cover.

These and other findings are up for appeal. In the meantime, the lesson to draw from these two decisions is that, as always, the devil is in the detail and the meaning of words (and how they applied) depends primarily upon context.