Liberty Mutual Insurance Europe SE & Ors v Bath Racecourse Company Limited & Ors

A composite insurance policy comprises separate contracts with the separately insured parties. Whether a policy limit is shared or separate remains a question of construction. In the absence of clear wording creating a shared aggregate limit, a reasonable policyholder will not expect its limit to be eroded by another insured’s claim.

Government CJRS reimbursements reduced employment costs for the purposes of business-interruption savings clauses. The causal inquiry mirrors the insured peril and permits concurrent causation. The payments were statutory support to mitigate the effects of restrictions, not collateral gifts, and had to be credited against the indemnity.

Five conjoined appeals arose from business-interruption claims by hotel, racecourse and related businesses following Covid-19 restrictions. Jacobs J in the Commercial Court determined preliminary issues in a judgment reported at [2024] EWHC 124 (Comm).

The insurers challenged rulings that prevention-of-access and denial-of-access limits in composite policies applied separately to each insured, that the Bath Racecourse denial-of-access limit remained £2.5 million for any one loss, and that the claims-preparation limit was available separately to each insured. The insureds challenged the ruling that payments received under the Coronavirus Job Retention Scheme had to be deducted as savings.

The central questions were the construction of the composite-policy limits and whether CJRS payments reduced costs in consequence of the composite insured peril.

Disposition

The Court of Appeal dismissed both the insurers’ appeals and the insureds’ furlough appeals.

1. A composite policy contains a series of separate contracts insuring each insured separately. The denial-of-access and prevention-of-access clauses therefore concerned the business and premises of the particular insured. In the absence of clear language making the relevant limits shared aggregates, the limits applied separately to each insured. The parties’ use of one policy document did not expose an insured’s cover to erosion by another insured’s claim.

2. Condition 22 of the Bath Racecourse policy increased the denial-of-access limit from £1 million to £2.5 million, but did not delete the words “any one loss”. A fundamental change to an aggregate basis would have required clear language, such as express deletion and replacement or the words “in the aggregate”. The £2.5 million limit remained applicable to each insured’s loss.

3. CJRS reimbursement of 80% of furloughed employees’ wages reduced the business’s employment costs by that amount. The commercial and economic reality was that the insured did not bear that part of the wages bill. It made no difference that the insured first paid the wages or that the reimbursement came from the Government.

4. The savings clauses were part of the machinery for quantifying an indemnity. They were to be construed consistently with the indemnity principle and the policy wording seeking to approximate the results which would have been obtained without the incident. The clauses did not permit recovery exceeding the loss suffered.

5. The phrase “in consequence of” required the same concurrent-causation approach as the composite insured peril. Covid-19 within the relevant radius, the resulting Government restrictions, and the consequent prevention, hindrance or interference were sufficient effective causes of the CJRS and its payments. It was irrelevant that other businesses could receive CJRS payments without holding these policies or proving these insured perils.

6. CJRS payments were statutory measures mitigating the economic effects of restrictions and conferred, in effect, a public-law right on qualifying employers. They were neither benevolent nor ex gratia gifts. The collateral-benefit argument therefore failed, and the insureds had to credit the CJRS payments under the savings clauses.

• Court of Appeal (Civil Division) — dismissed the insurers’ appeals on policy limits and the insureds’ appeals concerning CJRS deductions: [2025] EWCA Civ 153.
• Commercial Court — Jacobs J determined the preliminary issues, including the construction of the composite policies and the application of the savings clauses: [2024] EWHC 124 (Comm).