English commercial judge decides preliminary point in £260m Covid business interruption insurance case in favour of insurers

About this case:

• Citation:
  [2023] EWHC 1269 (Comm)
• Judgment:
  External link
• Court:
  England and Wales High Court
• Judge:
  Mr Justice Jacobs

The PizzaExpress group, insured by Liberty Mutual Insurance Europe and XL Insurance Company SE, sought approximately £82 million pursuant to at-the-premises cover as well as £178 million pursuant to prevention of access cover. The insurers contended that the sub-limits on the relevant policies would, if they applied at all, only give rise to a maximum indemnity of £250,000 for each of the three lockdown periods.

The case was considered by Mr Justice Jacobs, with Thom Weitzman KC and Peter Ratcliffe appearing for the claimants and David Scorey KC and Sushma Ananda for the defendants.

Any one incident

The factual background to the claim arose from the closure or restricted opening of the claimants’ 417 restaurants in England between March and November 2020 caused by measures introduced during the Covid-19 pandemic. The relevant policy covered the period from 1 July 2019 to 30 June 2020, containing standard form Aon Trio Property and Business Interruption wording, with extensions covering beyond what might be regarded as the normal business interruption loss covering physical damage to the premises.

Under the first extension, cover was provided in respect of “any occurrence of a notifiable human disease at the premises” that caused restrictions on the use of the premises on the order or advice of a statutory, local, or other competent authority. Under the second, cover was provided in respect of the closure or sealing off of the premises by the police, fire brigade, or other statutory authority due to an “emergency event” at or within one mile of the premises preventing or hindering their use.

Coverage was denied under both extensions by the defendants. They took the view that the cover provided by both extensions was “localised cover” which did not cover business interruption losses caused by central government action taken in response to a nationwide public health emergency. Construction of the relevant parts of the policy arose as a preliminary issue during the case management conference stage.

On behalf of the claimants, it was submitted that there was no express provision in the policy that would allow for sub-limits on liability to be subject to any one occurrence aggregation. Instead, the sub-limits applied to any one incident, i.e. to each occurrence of an insured peril. The insurers submitted that on any reasonable reading of the policy schedule, all limits of liability, including the sub-limits, applied to “any one occurrence” unless otherwise stated.

Distinction without a difference

In his decision, Justice Jacobs observed: “It is common ground that neither ‘Limit of Liability’ nor ‘Limits of Liability’ is defined in the Policy. In its ordinary meaning, however, that expression would encompass all the limits of liability set in the Schedule, including those limits described as “Sub-limits”. As a matter of ordinary language, a sub-limit is just as much a limit of liability as an aggregate or overall limit.”

He continued: “In his reply submissions, Mr Weitzman described sub-limits as a further ‘restriction’ upon the policyholder’s rights, or a ‘further limit which restricts the rights further’, but submitted that this did not mean that it was a limit of liability. I do not accept this argument, which draws a distinction without a difference. The ‘restriction’ or ‘limit’ is a limit on the insurer’s liability and therefore on the amount which the policyholder can claim. It is, therefore, a ‘limit of liability’ in the ordinary sense of that term.”

Addressing the intentions of the draftsperson of the relevant parts of the schedule, Jacobs J said: “The substance of PizzaExpress’s argument is that the draftsperson has been careful to draw a fundamental distinction between the ‘Limit of Liability’ column, which do apply on the basis of ‘any one Occurrence’, and the Sub-limits which do not. I think that it can fairly be said that if this distinction was intended, then one would expect it to be explained clearly; rather than being left to be derived from subtle differences derived from the words ‘Sub-limits’, ‘Limits of Liability’ and ‘limits’ all of which appear in the text at the top of the page. I do not consider that small differences in these expressions can bear the weight of the conclusion which PizzaExpress seeks to draw.”

Jacobs J concluded: “In my view, the Insurers’ arguments are more significant and weighty than these small textual differences, or any of the other points which Mr Weitzman made in the course of his submissions. Although there may be minor inconsistencies in terminology and capitalisation, the obvious conclusion to be drawn by any reasonable reader is that every figure in the table was, unless otherwise stated, subject to the default rules there set out, including the ‘any one Occurrence’ default rule.”

The preliminary issue was according answered in favour of the defendants.