The Court of Appeal will soon consider key outstanding points in the ongoing Covid-19 business interruption litigation: firstly from 21 to 24 January in respect to insurers’ appeals against the initial judgment in Bath Racecourse & Ors v Liberty Mutual, and secondly on 28 and 29 January in respect to an appeal by policyholders to determine whether insurers are entitled to deduct ‘furlough’ payments from indemnities.
Head of Policyholder Disputes Aaron Le Marquer and partner James Breese represent the lead claimant policyholder Bath Racecourse in both these test cases, and have led on several of the major milestone cases in the half-decade of Covid BI litigation. In June 2024 the Court of Appeal issued a unanimous decision in favour of Stewarts’ client the ExCeL Centre in relation to ‘At the Premises’ disease clauses; the Supreme Court has subsequently refused insurer Allianz’s application for permission to appeal that ruling.
Both appeals have been listed in The Lawyer’s Top 10 Appeals of 2025 list, which acknowledges that their outcomes are “expected to cause ripple effects in the insurance market for both insurers and insureds.” Adam Kramer KC and William Day of 3 Verulam Buildings are instructed as counsel.
21-24 January: Non-Damage Denial of Access wordings
In the next instalment of the long-running LMIE Test Cases, the Court of Appeal will hear various appeals from insurers in relation to Liberty Mutual’s proprietary Prevention of Access (Non Damage wording).
The Court of Appeal will be asked to determine whether the Supreme Court’s judgment on causation applies to POAND/Non-Damage Denial of Access wordings as it does disease and at the premises wordings. In January 2024, Mr Justice Jacobs found substantially in policyholders’ favour, concluding that the NDDA clause responds to Covid losses.
As part of the aggregation issues under consideration, Bath Racecourse v Liberty Mutual will also notably address the “composite policy issue”, a point of principle with ramifications for all lines of commercial insurance. The Court of Appeal will consider whether a composite insurance policy entitles multiple insured policyholders to their own separate indemnity limits and sub-limits under a single composite policy.
It is noteworthy that some policyholders in the LMIE Test Cases have been able to settle their cases with insurers, notwithstanding insurers’ ongoing appeals of these issues.
28-29 January: Furlough payments
For the first time, the Court of Appeal will also be asked to determine whether it is correct that insurers should be entitled to deduct from any indemnity owed the sums policyholders received from the government’s Coronavirus Job Retention Scheme, ie furlough payments, in a separate appeal brought by policyholders.
In the £1.1 billion Stonegate v MS Amlin litigation brought by the UK’s largest pub operator, the court found in favour of insurers, reasoning that payment of furlough monies to the policyholder engaged the savings provision in the policy wording. Permission to appeal was granted to Stonegate, but the case settled before reaching court.
Insurers involved say (among other arguments) that businesses would be overcompensated and receive a ‘windfall’ if furlough payments are not deducted from their claims. In response, the policyholder businesses say the intention of the furlough scheme was to support businesses and save jobs, not to subsidise insurers who sold policies covering losses that occurred; and that it is the insurers who receive a windfall from taxpayer funds by claiming the benefit of the furlough payments.
The UK government has previously confirmed that other forms of state support were not intended to benefit the balance sheets of global insurers, and a majority of insurers agreed not to deduct government grant income from Covid-19 BI indemnities.
Public data shows that a total of £64 billion was paid in respect of furlough claims between April 2020 and May 2021. Furlough deductions often account for 50% or more of the total claimed, in some cases extinguishing the claim altogether. The outcome of the furlough issue at the Court of Appeal is valued in the billions to the insurance industry, in respect of increasing liability for claims previously settled.
Aaron Le Marquer comments: “The potential consequences of these cases extend far beyond the long-running Covid BI litigation, as the results may unlock large sums for policyholder businesses facing numerous economic headwinds. Insurers, policyholders, and insolvency practitioners dealing with businesses who have already succumbed to these headwinds should all be watching the results keenly.”
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