Insurers welcome High Court decision in Stonegate Group Covid-linked BI case

In October 2022, the UK’s High Court handed down its ruling on the Covid-19-related business interruption (BI) lawsuit Stonegate Pub Company vs MS Amlin, confirming that organisations submitting Covid-linked BI claims could not claim where losses were covered by government furlough payments.

This case is the highest profile lawsuit of a number of legal battles between hospitality businesses and their insurers around BI claims caused by Covid-related lockdowns.

Stonegate Group is the UK’s largest pub group, with 4,500 national sites. Its brands include Be at One, Slug and Lettuce and Walkabout, to name a few.

Following the Covid-19 lockdowns, the group announced in July 2021 that it was suing its insurers for £846m in compensation for BI losses during the pandemic after it was forced to shut 760 of its pubs, bars and restaurants.

The legal case considered whether Stonegate Group’s losses were limited by the aggregation language in its policy, questioned the extent to which losses were caused by cases of Covid-19 or government action within the policy period and explored whether insurers were entitled to credit for furlough payments received by Stonegate Group.

However, Stonegate Group’s three insurers – MS Amlin, Zurich and Liberty Mutual – contested that liability for Covid-linked business interruption was capped at £17.5m, with £14.5m of this already paid.

The judgment, which was handed down on 17 October 2022, found that there were only two separate events experienced by Stonegate Group which could trigger BI claims payments.

Plus, the High Court judge decreed that Stonegate Group also could not claim where losses were covered by government furlough payments.

In a statement to Insurance Times, a spokesperson from Stonegate Group said: “The outcome of this case is far from conclusive.

“We are pleased that the judge found in our favour in a number of key issues and note that he sided with our insurers on others. In this sense, the outcome is similar to the judgment of the Divisional Court in the test case brought by the FCA last year.”

The spokesperson added that Stonegate Group intended to appeal the decision because it believes the High Court’s interpretation “on a number of key issues which are generally applicable to policyholders is out of step with the approach taken by the Supreme Court in the [FCA’s] test case”.

They continued: “In the circumstances, we and other businesses are entitled to look to our insurers to provide the cover promised under our policy.”

A welcome judgement

Despite Stonegate Group’s intention to appeal certain aspects of the High Court’s decision, its insurer MS Amlin welcomed the judgment, which it said had “fundamentally supported the insurer’s position”.

In a statement, MS Amlin said that the court had ruled “entirely in favour of insurers” on the issues of aggregation, Covid losses, government action during the pandemic and credit for furlough.

Johan Slabbert, outgoing chief executive of MS Amlin Underwriting, said: “We welcome the judgment of the High Court and believe this brings some genuine clarity to a very complex business interruption case.

“This is a positive outcome for us and is of significance to the entire insurance industry, [which] I’m sure will be keen to read the full details of the judgment, as issues around furlough payments and aggregation in particular have the potential to have an enormous financial impact for insurers throughout the UK.

“As an insurer upon whom thousands of businesses rely for support, we have always taken our responsibilities extremely seriously.

“Covid created unprecedented challenges for businesses across the country and our commitment to helping our policyholders remains as strong as ever.”

Far reaching implications

For Naz Gauri, principal associate at Eversheds Sutherland, the High Court decision in this instance “could have far reaching implications for those grappling with Covid-19 BI claims, particularly in relation to aggregation.”

Gauri recommended that insurers consult the High Court’s guidance regarding potential aggregating occurrences and events, since this will be relevant for a variety of aggregation wordings and not limited to event-based formulations.

He added: “Insurers will welcome clarity regarding the status of government support payments, which chimes with well recognised principles of insurance law and commercial reality.

“I could also see how certain other aspects of the court’s findings on causation might be appealed. Certainly that would be supported by those seeking to recover losses which directly resulted from later lockdown measures but nonetheless stemmed from earlier insured events occurring during – or shortly before – the first governmental intervention.”