The Court of Appeal has upheld a High Court decision ruling that limits stipulated in composite insurance policies should be treated as separate contracts.
The ruling also stated that insured parties must give credit for payments received under the Coronavirus Job Retention Scheme (CJRS).
The decision, issued on February 21, rejected appeals by several insurance companies, arising from claims made by Bath Racecourse Company and other policyholders against Liberty Mutual Insurance Europe, Allianz Insurance and Aviva insurance following business interruptions caused by the COVID-19 pandemic and related government restrictions.
In its January 2024 decision, the High Court determined that the policies in question were composite policies, meaning each insured party had a separate contract with the insurer, and that policy limits applied individually. The court also ruled that CJRS payments, commonly known as furlough payments, reduced the insureds’ wage costs and should be deducted from the indemnity payable.
In its decision, the Court of Appeal said that policy limits should apply separately to each insured and not as aggregate limits across all insureds. The court cited one case wherein the ruling said that a composite policy takes legal effect by way of separate contracts of insurance.
Commenting on the ruling, James Breese, counsel for Bath Racecourse, said that the Court of Appeal’s decision was “an important one” for corporate groups with multiple insured entities under one policy document. “The reach of this decision extends far beyond COVID-19 business interruption insurance disputes,” Breese said.
The appellate court also ruled that CJRS payments should be deducted from the amount insurers were required to pay since they reduced wage costs.
“The bottom line, at the end of the day, is that the insureds did not have to bear the expenses of the wages bill and, to that extent, the charges or expenses of the business were reduced,” according to the ruling.
In an interview with Insurance Business last month, Breese said that the decision on the furlough issue would be of interest to all because it may increase the value of claims for UK businesses.
“For those UK businesses that have previously recovered COVID-19 business interruption losses from insurers, they must go back to check whether they could recover additional sums if the decision on furlough is reversed,” Breese said. “UK businesses may be able to claim from insurers the sums that insurers deducted from indemnity payments if they took the credit for the furlough payments, as they are currently entitled to.”
In Bath Racecourse and Others v Liberty Mutual Insurance Europe and Others, Liberty Mutual, Allianz and Aviva were represented by David Scorey KC and David Walsh of Essex Court Chambers, instructed by DAC Beachcroft.
Bath Racecourse and 21 other claimants were represented by Adam Kramer KC and William Day of 3 Verulam Buildings, instructed by Stewarts. Additional claimants, including Gatwick Investment and Starboard Hotels, were represented by Jeffrey Gruder KC of Essex Court Chambers and Josephine Higgs KC of 7KBW, instructed by Edwin Coe.
