On 16 January 2024, the Court of Appeal (Males LJ giving the judgment, with whom Sir Julian Flaux C and Newey LJ agreed) handed down a judgment in Allianz v Various Eateries Ltd  EWCA Civ 10 addressing issues of aggregation and limits under business interruption insurance placed on the widely used “Marsh Resilience Form”. The Court of Appeal’s judgment, which – in conjunction with the judgment of Butcher J – addressed certain issues left unresolved by the FCA Business Interruption Test Case, is likely to be of significance to the insurance market in the context of Covid-19 related business interruption claims on the approach to be taken on appeal to decisions on aggregation and the role of remoteness in the context of aggregation.
Various Eateries was one of three preliminary issue trials raising common issues under the Marsh Resilience Form heard sequentially by Mr Justice Butcher, who handed down three judgments on 17 October 2022 which cross-referred to one another. Butcher J granted permission to appeal in all three actions on issues of aggregation and limits, however the other two actions (Stonegate and Greggs) were compromised prior to their appeals being heard, leaving Various Eateries as the only appeal on these issues heard by the Court of Appeal. The policyholder, Various Eateries, operates a chain of restaurants, including the well-known Italian restaurant Strada.
At first instance, on the principal issue of aggregation, Allianz relied on 18 different candidates which were contended to be aggregating occurrences for the purposes of the £2.5 million limit under the aggregation clause in the Marsh Resilience Form. Those candidate occurrences traversed the chronology of the Covid-19 pandemic across the relevant policy period, beginning with events in Wuhan, and concluding with Government action in the United Kingdom. Butcher J grouped Allianz’s candidate aggregating occurrences into five categories: (1) “virology candidates”, which included matters such as the initial mutation(s) which led to the progenitor virus, (2) “Wuhan transmission/outbreak candidates”, which included matters such as the first transmission or outbreak of the disease in Wuhan, (3) “England/UK transmission/outbreak candidates”, which included the first and first relevant introductions of Covid-19 into England or the UK, (4) “Pandemic in the vicinity” candidates, which included the continuation and spread of Covid-19 in England and the UK, and (5) “Governmental actions candidates”, including the Government’s social distancing instructions on 16 March 2020 and subsequent governmental action.
Although Mr Justice Butcher found several of these candidates to be “occurrences” within the meaning of the well-established aggregation test, he concluded that the only relevant occurrence for the purposes of the aggregation clause was governmental action taken in response to the spread of Covid-19, finding that the other candidates were too remote.
Allianz appealed, with the permission of the Judge, against that conclusion, seeking to establish that losses aggregated to one or more of the “Wuhan transmission/outbreak candidates”. The main argument advanced by Allianz was that the Judge had erred in his application of the remoteness test in aggregation. For its part, Various Eateries cross-appealed, challenging the Judge’s conclusion that the £2.5 million aggregation limit applied across all of Various Eateries’ venues, contending that each insured venue had its own £2.5 million aggregation limit. Separately, Various Eateries also sought permission to appeal on a rolled up basis addressing two other discrete issues concerning the application of limits and the aggregation clause.
The Court of Appeal dismissed Allianz’s appeal, concluding that Mr Justice Butcher’s decision was an evaluative one with which the Court of Appeal should not interfere unless satisfied that there was an error of principle, of which there was none. The Court of Appeal went further and held that, in any event, it considered the Judge’s conclusions on remoteness to be correct. Various Eateries’ cross-appeal was also dismissed, and the Court of Appeal refused Various Eateries permission to appeal on certain discrete issues which were addressed on a rolled up basis at the appeal hearing.
The Court of Appeal’s judgment provides valuable guidance on the approach of appellate Courts in reviewing first instance decisions regarding aggregation, and on the role of remoteness in construing and applying aggregation clauses.
The judgment can be found here.