“This week, the Government has taken unprecedented steps to fight the coronavirus. We have closed schools. We have told people to stay at home to prevent the spread of infection. We are now closing restaurants and bars. Those steps are necessary to save lives. But we don’t do this lightly - we know those measures will have a significant economic impact. I have a responsibility to make sure we protect, as far as possible, people’s jobs and incomes. Today I can announce that, for the first time in our history, the government is going to step in and help to pay people’s wages. We’re setting up a new Coronavirus Job Retention Scheme.”
“In overview, under the CJRS, until30 September 2021 (when the scheme ended) UK employers could make a claim to obtain payment / reimbursement from HMRC of up to 80% of expenditure incurred on costs of employment of qualifying “employees” who were not working but kept on payroll (i.e. “furloughed”) for more than 21 days (before30 June 2020 ) by reason of circumstances arising as a result of coronavirus or coronavirus disease (“furloughed employees”), up to a maximum of£2,500 a calendar month per employee. Reimbursement of employer expenditure (including expenditure on employer national insurance contributions and pension contributions) was to be made by HMRC if the conditions of the scheme were satisfied. 405. The basic approach of the CJRS was, therefore, to reimburse employers for the continued payment of furloughed workers. Thus, employees were “furloughed” for the purposes of the CJRS if they were put on a period of leave during which they were instructed to cease all work for the employer in accordance with the CJRS, and employers recovered reimbursement of pay from HMRC in respect of furloughed employees.”
“Denial of Access This Section extends to include any claim resulting from interruption of or interference with The Business carried on by The Insured at The Premises in consequence of … (b) action by the Police Authority and/or the Government or any local Government body or any other competent authority following danger or disturbance within a one-mile radius of The Premises which shall prevent or hinder use of The Premises or access thereto … provided that after the application of all other terms conditions and provisions of this Section the liability of the Insurer shall not exceed … (i) GBP 1,000,000 in respect of (a) above any one loss (ii) GBP 1,000,000 in respect of (b) above any one loss”
“22. Notwithstanding anything contained herein to the contrary, the limit in respect of Section 2 - Particular Settlement Terms, Denial of Access:- Proviso (i) is amended in respect of (a) to GBP 1,000,000 and a maximum indemnity period of 3 months. Proviso (ii) and (iii) are amended in respect of (b) and (c) to GBP 2,500,000 and a maximum indemnity period of 3 months.”
“Savings If any of the charges or expenses of The Business payable cease or reduce in consequence of the Damage such savings during the Indemnity Period shall be deducted from the amount payable.”
“Claims Preparation Clause Notwithstanding anything contained herein to the contrary this Certificate is extended to pay the exceptional costs not otherwise covered herein necessarily and reasonably incurred by the Insured with the Insurer’s prior consent to prepare and verify the amount of claims admitted under this Certificate in accordance with the claims conditions of this Certificate where such claims are in excess of GBP 50,000 above the applicable deductible. These costs shall not include the cost of negotiation of the claim with the Insurer or its representatives. The liability of the Insurer under the terms of this Condition shall not exceed GBP 50,000 in respect of any one claim or series of claims arising from a single occurrence.”
“Under Business Interruption loss following interference with the Business carried out by the Insured in consequence of action by the Police or other Statutory Authority following danger or disturbance within 1 mile of the Premises which shall prevent or hinder use of the Premises or access thereto or, interference with the Business carried out by the Insured. Provided that the Company shall not be liable under this extension for more than the amount shown against this extension in the Schedule. Subject to the terms, Conditions, limits and Exceptions of this Policy”
“Under Business Interruption the insurance under this item is limited to a) Loss of Gross Revenue and b) Increase in Cost of Working and the amount payable as indemnity thereunder shall be: a) In respect of Loss of Gross Revenue, the amount by which the Gross Revenue during the Indemnity Period shall fall short of the Standard Gross Revenue in consequence of the Incident; b) In respect of Increase In Cost of Working the additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in Gross Revenue which but for that expenditure would have taken place during the Indemnity Period in consequence of the Incident but not exceeding the amount of reduction in Gross Revenue thereby avoided; less any sum saved during the Indemnity Period in respect of such of the charges of the Business payable out of Gross Revenue as may cease or be reduced in consequence of the incident. Notwithstanding anything herein contained to the contrary the liability of the Company shall in no case exceed: in respect of Gross Revenue 133.33% of the Estimated Gross Revenue stated herein; in respect of each other Item 100% of the Sum Insured; or in the whole the sum of 133.33% of the Estimated Gross Revenue and 100% of the Sums Insured by other Items.”
“Limit of Indemnity shall mean: (a) for the purposes of Sections 1 to 6, the total liability of the Company for all amounts payable in accordance with the Insuring Clause under these Sections for any loss or series of losses arising from any one occurrence as stated in the Schedule. For the avoidance of doubt the Limit of Indemnity is inclusive of the relevant Deductible stated in the Schedule…”
“…I do not consider that the reasonable reader would conclude that there was any fundamental distinction between “Limit” and “Limit of Indemnity”, whereby the former but not the latter resulted in per interference/ per premises cover. Rather, “Limit” is indeed simply a shorthand for “Limit of Indemnity”
“233. In my view, this argument is effectively destroyed by the success of the argument of insurers which is considered above: i.e. that the “Limit” in the policy Schedule Section 2 was to be equated with “Limit of Indemnity” as defined in the policy. The “Limit” is therefore, by the express terms of the policy, an “any one occurrence” limit. I do not consider that the words of the POAND endorsement can reasonably be read as imposing any limit beyond the “any one occurrence” limit which is thus provided for in the policy Schedule. The final words of the endorsement simply mean that Liberty Mutual and Aviva are not liable under the POAND extension for more than£ 1,000,000 for any loss or series of losses arising from any one occurrence.”
“Accordingly, I reject the argument that the POAND clause is subject to an aggregate limit. In my view, the relevant limit is “any one occurrence” as provided for in the Limit of Indemnity provision, and there is no aggregate limit.”
“In Corbin & King, Cockerill J concluded “without difficulty” that the correct answer was that the policy in that case was a composite policy in respect of which each insured could claim up to the relevant policy limit. I do not consider that there is any material distinction, in that context, between the composite policy at issue in Corbin & King and the composite policy covering the various Starboard insureds.”
“Her reasons for reaching her conclusion were in summary as follows. The policy was a composite policy, covering insureds with separate interests to insure. It was not therefore a policy covering joint interests in the same property. Whilst there was no invariable rule, it was fair to say that the “expectation raised by the authorities is that a composite policy is treated as a series of contracts - and hence will be treated as giving the relevant cover per contract”
“not an insignificant conclusion because although it is not beyond the bounds of possibility that there could be a composite policy with a single limit which applies to all the premises and all the claims, that would certainly not be the expectation in the context of a composite policy”.” “not an insignificant conclusion because although it is not beyond the bounds of possibility that there could be a composite policy with a single limit which applies to all the premises and all the claims, that would certainly not be the expectation in the context of a composite policy”.”
“Furthermore, I do not consider that there is any material distinction in the wordings which would lead the court to reach a different conclusion to that reached by Cockerill J. The POAND endorsement in the present case refers to “Business Interruption loss following interference with the Business carried out by the Insured in consequence of action …. following danger or disturbance within 1 mile of the Premises which shall prevent or hinder use of the Premises”
“Unless stated otherwise the Insurer will not pay more than the Sum Insured Compensation or Limits of Indemnity in any one Period of Insurance”
“Any costs normally payable out of Turnover (except depreciation) as may cease or be reduced during the Indemnity Period as a consequence of the Covered Event”
“In my judgment, employment costs were at least ‘reduced’ pro tanto by reason of the payment of corresponding amounts under the CJRS. I consider that the natural meaning of the definition, including its savings clause, is that it is referring to costs to the business. Insofar as such costs were defrayed by the government, I consider that they were ‘reduced’. That, in my view, reflects the net financial effect of payments under the CJRS and the commercial reality.”
“Put shortly, paying someone to keep incurring an expense is the opposite of the expense ceasing.”
“Butcher J relied upon Synergy as further support for the principle that the relevant contractual provision should be construed, if there is any room for argument, to accord with the basic principle that an insurance policy is a contract of indemnity. In that context, Butcher J cited (at paragraph [267]) the judgment of Brett LJ in Castellain v Preston(1883) 11 QBD 380 . It is not clear to me that the New South Wales Supreme Court would substantially disagree with Butcher J’s proposition.”
“It is obviously no coincidence that the first announcement of the furlough scheme on20 March 2020 was on the very same day that the government announced that it would be closing down a variety of businesses.”
“It is of course true that the furlough scheme was not simply a consequence of the restrictions on the particular businesses operated by the policyholders in this case. It was a consequence of restrictions which affected a very large number of businesses across the economy as a whole. However, the effect of the decision of the Supreme Court in the FCA test case is that, when considering the operation of the insured peril, a concurrent causation analysis is to be applied. It is therefore sufficient, for the purposes of coverage, for a policyholder to show loss flowing from a combination of an insured peril which affected its business together with similar perils which affected other businesses. I consider that the same approach can and should properly be taken when considering causation in the context of the receipt of CJRS payments. It is therefore sufficient to show that the CJRS (and thus the payments made pursuant to that scheme) was brought into being in consequence of a combination of government restrictions affecting the business of each claimant policyholder in combination with restrictions affecting the business of other policyholders.”
“Thus, as Mr Scorey submitted, the case against the insurers in relation to the peril is a concurrent causation analysis: there was a relevant action by the statutory authority following disease within 1 mile of the premises, and that interfered with the policyholders’ business. Equally, the furlough savings were in consequence of what had happened: they were brought in because of damage to businesses caused by the restrictions on a large number of businesses, including those of the claimants, brought in by the government as a result of the pandemic. I agree with Mr Scorey that what works on one side of the line should also work on the other, and that it is not appropriate to take a different and much stricter approach to causation in the context of savings than in the context of the insured peril.”
“Accordingly, McDonald J was not focused solely on the criteria for payment under the TWSS, but applied a broader causation analysis. Furthermore, it was no obstacle to the broad causation analysis that the criteria under section 28 of the 2020 enactment applied “more widely than in the context of closures”
“I accept Mr Scorey’s submission that there is a sufficient and indeed proximate causal connection between the composite insured peril and the CJRS payments which were made and thus reduced the wage costs of the business.”
“The point about the composite nature of the policy is actually quite a simple one. As already mentioned, reading the policy as a separate insurance for Technip, Technip argued that it was obvious that "the Principal Assured" whose property was referred to in the first limb of endorsement 2 was Technip, not KJO or any other Principal Assured. There is, however, a fatal flaw in that argument. It is true that the policy is a composite policy that is expressly "deemed to be a separate insurance in respect of each Principal Insured". But in reading endorsement 2 in Technip's deemed separate insurance, the words "the Principal Assured" cannot have any different meaning than they have in the other imagined separate insurances for each of the other insureds. Accordingly, if the words "the Principal Assured" mean "Technip and/or KJO and/or associated companies", they must have that same meaning in each separate insurance including Technip's separate insurance.”
“…there is no invariable rule. However, it is probably fair to say that the expectation raised by the authorities is that a composite policy is treated as a series of contracts - and will hence be treated as giving the relevant cover per contract… …although it is not beyond the bounds of possibility that there could be a composite policy with a single limit which applies to all the premises and all the claims, that would certainly not be the expectation in the context of a composite policy.”
“Despite emphatic protests by Mr Rokison whenever the topic was mentioned, once it had been decided under issue F that each company was separately insured the answer to this question must be that in general there was a separate limit for each company.”
“This last issue is particularly difficult, largely owing to the obscurity of the contract wording. Despite the assistance of counsel we have found difficulty understanding the questions, let alone deciding them.”
“The answer to question (1) seems to me straightforward. Given that I have held that the insurance is composite, then the effect is to create a separate contract of insurance with each insured under which the policy limits apply separately to each company insured.”
“Technically one ought to enquire whether for each layer in each year there was one contract, or as many contracts as there were companies insured. And if the former, can a contract be avoided for non-disclosure as against one or some of the insured, but not against others? We feel that we are relieved from the need to answer those questions by the authority of the House of Lords, in the passage already quoted from P Samuel & Co Ltd v Dumas. That, it is true, was not a case of non-disclosure but of wilful misconduct by one of two persons insured. But in our opinion the principle that the innocent party can still recover if it is a separate insurance must equally apply.”
“We agree with the judge that all the contracts of insurance were composite in nature, there being more than one insured ‘and each being insured separately.”
“once it had been decided under issue F that each company was separately insured the answer to this question must be that in general there was a separate limit for each company.”
“Provided that…the liability of the Company under this Section shall not exceed: (a) the aggregate Limit of Indemnity as stated in the Schedule”
“Subject to the terms, Conditions, limits and Exceptions of this Policy”
“It was common ground that the Starboard Policy was a composite policy: that is, a policy which insures the interests of a number of different insured persons in one document, and which took effect legally by way of separate contracts of insurance between Liberty Mutual and each of the individual insured companies.”
“It has become commonplace for reasons of commercial convenience to insure the interests of a number of insured persons under one policy of insurance, either because it concerns property in which they are all interested, as in General Accident Fire & Life Assurance Corp Ltd v Midland Bank Ltd[1940] 2 KB 388 and State of the Netherlands v Youell[1997] 2 Lloyd’s Rep 440 ; or because they are all companies within one corporate group which can obtain insurance more effectively and cheaply through a single policy…”
“[that the policy is a composite policy] is important, because – in accordance with the various authorities, including those discussed in Arab Bank plc v Zurich Insurance Co and more recently Corbin & King Ltd v AXA Insurance UK plc[2022] EWHC 409 (Comm) – no conduct or knowledge on the part of one Insured can be attributed to another Insured for the following purposes: a. Avoidance of the Policy by reason of a non-disclosure or misrepresentation by another insured will not prejudice the claimant insured. b. The application of an exclusion based on wilful misconduct is limited to the guilty insured. c. The application of other types of exclusion based on the conduct of an insured other than the claimant insured. d. The application of a breach of warranty by one insured will not ordinarily affect another Insured. e. The application of policy limits.”
“once it had been decided under issue F that each company was separately insured the answer to this question must be that in general there was a separate limit for each company.”
“Although a composite policy may insure each assured separately in respect of his own loss, it is a matter of construction whether a policy is to be construed as requiring the [insurers] to pay more than the sum insured under the policy where each of the co-assureds has separate claims.”
“The requirement of “proximate” causation is based on the presumed intention of the contracting parties…”
“The purpose of business interruption insurance is to inject additional funds into a going concern to maintain it as a going concern and, in that respect, to return it to an operational state as soon as possible…”
“But the difference is in the nature of the payment, to which Lord Reid referred in Parry v Cleaver[1970] AC 1 . Mr Hunt's loan to EMSL was intended to and did lead to actual payment off of the first two loans which Swynson had made to EMSL.”
“Less any sum saved during the Indemnity Period in respect of such of the charges and expenses of the Business payable out of Gross Profit as may cease or be reduced in consequence of the Damage.”
“There is no basis for construing the Policy in some way which seeks to give effect to some overriding principle of indemnity. The task is simply one of construing the contract, here the Policy, and determining whether the JobKeeper Payments are to be taken into account in any of the integers of the calculation of the loss of gross profit as set out in the Policy.”
“if there is any room for argument, to accord with the basic principle that the Policy was a contract of indemnity.”
“…the language chosen by the parties must be given appropriate weight. Even where the result may lead either to under-indemnification or over-indemnification, the indemnity principle does not require that a strained or artificial meaning should be given to the words of a policy-at least where there is an evident business purpose for the parties’ choice of language…effect is given to the language chosen by the parties even where that does not result in a perfect indemnity. In the present case, the savings clause seems to me to fall into the category of an agreed formula. Accordingly, it is not surprising that its application may potentially give rise to an over-indemnification of the insured. I do not believe that the indemnity principle requires that the savings clause should be interpreted so as to give the words “in consequence of” a different meaning to the way in which those words would ordinarily be understood in an insurance context.”
“can the right to be insisted on be deemed to be one the enforcement of which will diminish the loss?”
“With regard to gifts, all that is to be considered is, has there been a loss, and what is the loss, and has that loss been in substance reduced by anything that has happened? Now I admit that in the vast majority of cases, it is difficult to conceive a voluntary gift which does reduce the loss.”
“Suppose that a man who has insured his house has it damaged by fire, and suppose that his brother offers to give him a sum of money to assist him. The effect on the position of the underwriters will depend on the real character of the transaction. Did the brother mean to give the money for the benefit of the insurers as well as for the benefit of the assured? If he did, the insurers, it seems to me, are entitled to the benefit, but if he did not, but only gave it for the benefit of the assured, and not for the benefit of the underwriters, then the gift was not given to reduce the loss, and it falls within Burnand v. Rodocanachi.”
“The payment by the brokers was a gift, albeit a gift made for commercial rather than purely disinterested purposes. The contracts of reinsurance are contracts of indemnity. The question is, therefore, whether the payment diminishes the loss. Not every gift to an assured by a broker diminishes his loss. It is a question of fact in each case whether a gift has or has not been paid in diminution of the loss, and if it is established that the payment was intended solely for the benefit of the assured, it has not been paid in diminution of the loss. In that event it must be disregarded in assessing the assured’s recoverable loss… The arbitrators made primary findings of fact that: (a) the payment was made to retain Merrett’s goodwill; that is to benefit Merrett; (b) the brokers expected to be reimbursed by Capitol. It follows inexorably that the payment was made solely for the benefit of the assured and not for the benefit of the reinsurer.”
“I agree with [counsel for the owners] that it is a bad point, to which the short answer is that the fact that Gard has funded some of the legal fees is res inter alios acta as between the owners and the insurers. Mr Blackwood QC sought to counter that argument by reference to the brokers' funding cases such as Merrett v Capital Indemnity Corp [1991] I Lloyd's Rep 169, but, as that case demonstrates, where the funding is voluntary (as it was in the present case) and therefore does not diminish the (re)insured's loss, it is to be disregarded in assessing the recoverable loss: see per Steyn J at 171 lhc and MacGillivray on Insurance Law 12th edition at [34-069].”
“From these cases [which included Burnand v. Rodocanachi, Castellain v Preston and Merrett v Capitol Indemnity], I take the position to be as follows: (1) If a third party has made a payment which has eliminated or reduced the loss to the insured against which it had insurance, then, subject to the exception below, the insurers are entitled to the benefit of that payment, either in reducing any payment that they might have to make under the policy or, if they have already paid, by claiming the amount from the insured. (2) This will not be the case, however, if it can be established that the third party, in making the payment, intended to benefit only the insured to the exclusion of the insurers. That might be established if, for example, the third party acted from benevolence towards the insured, as in the case of the brother in Bowen LJ's example in Castellain v Preston; or if that had been expressly stipulated by the third party; or if the third party had paid the money to retain the insured's goodwill and expected to be paid an equivalent amount by the insured's insurer. (3) In assessing the intentions of the third party payor, it does not matter whether that payor gave any thought to the position of insurers. A payment can still diminish the loss even if no such thought is given.”
“The requirement is that the cessation or reduction of charges or expenses be in consequence of “the” interruption or interference. This takes the reader back to the beginning of the “Cover” section, where reference is made to the insured’s business being interrupted or interfered with “as a result of Damage”
“if you are given this 80% grant under the CJRS, is that a saving?” would say: “of course, it is not an expense borne by my business”
“623 Further, the amount saved provision is also potentially applicable. If the amount paid by a third party means that an expense of the business is reduced, then that reduction must be taken to be in consequence of the interruption or interference unless the payment is incapable of being so characterised. Again, an insured cannot have it both ways. If the cover extends to the circumstances underlying the insured peril, then the expenses saved must also extend to the circumstances underlying the insured peril. 624 For the reasons already given, JobKeeper payments reduce the insured’s loss and expenses in the form of saved wages’ payments…”
“Accordingly, I am satisfied that in this case the insured companies were insured severally in respect of their several interests”
“A policy which insures the interests of a number of different insured persons under one policy of insurance is a “composite policy” and takes effect legally by way of separate contracts of insurance between Axa and each of the individual insured companies.”
“arguments of this sort based on verbal surplusage in a commercial contract do not count for much.”
“In my judgment, employment costs were at least ‘reduced’ pro tanto by reason of the payment of corresponding amounts under the CJRS. I consider that the natural meaning of the definition, including its savings clause, is that it is referring to costs to the business. Insofar as such costs were defrayed by the government, I consider that they were ‘reduced’. That, in my view, reflects the net financial effect of payments under the CJRS and the commercial reality.”
“The precise issue in Synergy Health was different from that here, in that it concerned a saving of depreciation. Nevertheless, I consider that the approach in that case is one which I should adopt in this case as well. The CJRS payments were in respect of an expense of the business, and resulted, in reality, in a saving of cost. For the clause to be construed so as to mean that those payments were not counted as savings would, in my view, mean that the insured would receive more than an indemnity. It should, if possible – and in my view it clearly is possible – be construed so that those payments are taken into account under the savings clause.”
“However, the effect of the decision of the Supreme Court in the FCA test case is that, when considering the operation of the insured peril, a concurrent causation analysis is to be applied. It is therefore sufficient, for the purposes of coverage, for a policyholder to show loss flowing from a combination of an insured peril which affected its business together with similar perils which affected other businesses. I consider that the same approach can and should properly be taken when considering causation in the context of the receipt of CJRS payments. It is therefore sufficient to show that the CJRS (and thus the payments made pursuant to that scheme) was brought into being in consequence of a combination of government restrictions affecting the business of each claimant policyholder in combination with restrictions affecting the business of other policyholders. …Thus, as Mr Scorey submitted, the case against the insurers in relation to the peril is a concurrent causation analysis: there was a relevant action by the statutory authority following disease within 1 mile of the premises, and that interfered with the policyholders’ business. Equally, the furlough savings were in consequence of what had happened: they were brought in because of damage to businesses caused by the restrictions on a large number of businesses, including those of the claimants, brought in by the government as a result of the pandemic. I agree with Mr Scorey that what works on one side of the line should also work on the other, and that it is not appropriate to take a different and much stricter approach to causation in the context of savings than in the context of the insured peril.”
“It follows inexorably that the payment was made solely for the benefit of the assured and not for the benefit of the reinsurer.”
“As to the intention of the Government in paying, Stonegate has not shown that this was with the intention of benefiting Stonegate alone to the exclusion of insurers. There is no express statement by the Government to that effect. The Government did not indicate that the payment was being made only in respect of uninsured losses. This is notwithstanding that, unsurprisingly, the Government was aware that some companies had BI insurance, as evidenced by the Treasury's Fact Sheet of18 March 2020 .”