Gatwick Investment Limited & Ors v Liberty Mutual Insurance Europe SE

In Covid-19 business interruption insurance claims, regulations made by central government under statutory powers constituted action by a “Statutory Authority”. A policy reference to “Limit” meant the defined “Limit of Indemnity”, ordinarily applying to any loss or series of losses arising from one occurrence rather than as an annual aggregate.

In a composite policy, the limit applied separately to each insured where the wording and separate insured interests supported that construction. Claims preparation costs could be recoverable separately where the policy imposed no applicable limit. Coronavirus Job Retention Scheme payments reduced relevant business costs and had to be credited under savings clauses where they were sufficiently connected with the insured composite peril.

A clause covering prevention by a “policing authority” required intervention by the police or a similar enforcing body, not merely compliance with government regulations.

The judgment determined preliminary issues arising in seven related Commercial Court claims for business interruption insurance losses allegedly caused by Covid-19 restrictions. The claims concerned hotels, leisure venues, licensed premises, retail businesses, racecourses and entertainment venues.

The issues included whether government regulations constituted action by a statutory authority; whether replacement regulations created new restrictions; the construction and operation of policy limits in composite policies; departmental clauses, additional increased costs of working and claims preparation costs; credit for payments under the Coronavirus Job Retention Scheme; and the meaning of “incident” and “policing authority” in an Allianz denial-of-access clause.

1. The court held that the Covid-19 restrictions relied upon by the Gatwick, Hollywood Bowl, Fullers and Starboard claimants resulted from action by a “Statutory Authority”. The expression covered an authority exercising powers derived from statute or statutory instrument. It was not confined to bodies created by statute or to local bodies similar to the police. The alternative “Police” limb did not apply because the police had not themselves forced the businesses to close.

2. The July 2020 regulations did not create new restrictions for Hollywood Bowl. There was a continuum of closure because its premises remained prohibited from opening.

3. Under the Liberty Mutual wordings, “Limit” in the schedule meant the defined “Limit of Indemnity”. The relevant limit was therefore the amount applicable to any loss or series of losses arising from any one occurrence. The policy did not impose an additional annual aggregate limit. The number of occurrences was reserved.

4. In a composite policy, the limit applied separately to each named insured where the insured interests were separate and the wording did not indicate a shared limit. This applied to Starboard, Liberty Retail and Bath Racecourse. The same reasoning supported a £2.5 million limit for each Bath Racecourse claimant under the amended denial-of-access clause.

5. The departmental clause concerned the calculation of gross profit. It did not create separate policy limits. It did not apply to businesses insured on a gross revenue basis, and separate hotels, pubs or bowling alleys were not ordinarily “departments”.

6. Liberty Retail could recover claims preparation costs under the general claims preparation clause. Because no applicable Section 2 limit was stated, the clause imposed no monetary limit, although prior consent remained necessary. Bath Racecourse claims preparation costs were separately limited to £50,000 for any one claim or series of claims arising from a single occurrence. Its additional increased cost of working cover did not increase the £2.5 million denial-of-access limit.

7. The court followed Stonegate on the effect of savings clauses. CJRS payments reduced the relevant employment costs. Causation was assessed by reference to the composite insured peril, not merely the criteria for receiving CJRS payments. The scheme was introduced as part of measures responding to the restrictions and the pandemic, so the payments were sufficiently and proximately connected with the insured peril.

8. Under clause S/30/1, a Covid-19 case was likely to endanger human life but was not, without more, an “incident”. The incident had to occur within one mile of the premises. “Policing authority” meant the police or a similar body whose function was to ensure that the law was obeyed and enforced. It did not include central government or the Secretary of State, and the prevention or hindrance had to be caused by that policing authority itself.

9. For the Allianz policy, the £500,000 limit applied per premises rather than per insured claimant. The words “in the aggregate during any one Period of Insurance” did not justify correcting the clause by adding “and” or otherwise converting it into an aggregate limit.