Court of Appeal decides that restaurant losses were due to lockdowns, not outbreak of Covid virus

The insured (Various Eateries Trading Limited “VE”, which operates the Strada chain of restaurants, amongst others) was claiming more than £16million from its insurers (Allianz) because of reduced trade and the ultimate closure of its restaurants during the Covid 19 pandemic.

Two key issues came before the Court of Appeal:

What was/were the occurrence(s) which caused VE’s loss?

The question of what caused the insured’s loss was relevant because there was a clause in the insurance policy providing for aggregation of losses that arose from a single occurrence. In other words, multiple losses arising from a single event were to be treated as a single aggregated loss and therefore subject to the policy’s £2.5million limit on recovery. The insurers argued that all VE’s business interruption loss arose in connection with a single occurrence, namely the initial outbreak of Covid-19 in Wuhan and that consequently their total liability for Covid-related business interruption would be limited to £2.5million.

The Court of Appeal agreed with the first instance decision that the initial outbreak in Wuhan was too remote to be the cause of the loss. A number of intermediate steps needed to occur between the outbreak of the disease and the closure of the restaurants in the UK, none of which were inevitable. In particular, it was by no means certain that the government would intervene with multiple instructions.  The nearer and more relevant causes of VE’s loss were the government’s response to the arrival and threat of spread of the virus in the UK. The government action amounted to three separate “single occurrences” for the purposes of the aggregation clause:

• The government’s instruction on 16 March 2020 that social venues should be avoided
• The “lockdown” of 20 March 2020
• The early closing and other restrictions on restaurants from 24 September 2020

Each of these occurrences was subject to a separate cap on recovery.

Did the insurance cap apply separately to each insured location (i.e., each restaurant)?

VE’s submission that aggregation should be on a per insured location basis was found to be inconsistent with the terms of the policy. VE was therefore not entitled to say that the limit of £2.5 million should be applied separately to each of its restaurants.

Various Eateries Trading Ltd v Allianz Insurance Plc