Court of Appeal. Business interruption insurance. Covid-19. Composite policies. Policy limits. Furlough payments.

The Court of Appeal (CA) resolved three critical insurance law questions: whether in composite policies limits apply individually to each insured; whether the specific Denial of Access clause limit retained its “any one loss” basis; and whether government furlough payments constitute deductible savings. A principled approach to composite policy construction was adopted, establishing definitive parameters for savings clauses in business interruption policies.

Background

These consolidated appeals concerned business interruption claims arising from the Covid-19 pandemic. Multiple claimants pursued recovery against insurers under composite policies containing Denial of Access or Prevention of Access Non-Damage clauses. The insurers contended that policy limits applied in aggregate across all insureds rather than individually, and that Condition 22 converted the Bath Racecourse policy’s Denial of Access coverage from “any one loss” to an aggregate basis. The claimants argued that CJRS furlough payments should not be deducted as “savings” from indemnity calculations.

Judgment

The CA unanimously dismissed all appeals, with Sir Julian Flaux C delivering the lead judgment, Henderson and Ahmed LJJ concurring.

Composite Policy

The CA determined that composite policies comprise “a series of separate contracts of insurance insuring each policyholder separately” [161], with limits applying individually to each insured absent express contrary provisions. Sir Julian Flaux C articulated the governing principle: “In the absence of any provision…that the limit…was intended to be an aggregate one (as was the case in Technip), the correct construction of those limits is that they are applicable to each insured separately” [165]. The CA distinguished Technip Saudi Arabia Ltd v The Mediterranean & Gulf Insurance [2024] EWCA Civ 48, which contained express aggregation language.

Policy Limit

Applying established principles of contractual construction, the CA rejected the insurers’ submission that Condition 22 converted the Bath Racecourse policy’s Denial of Access coverage from “any one loss” to an aggregate limit. The CA held that such a fundamental alteration would require explicit language: “if such a fundamental change had been intended, the wording would have made that change clear” [169].

Furlough

The CA’s analysis of CJRS payments proceeded through three analytical stages: (1) CJRS payments constituted a reduction in charges, as the “commercial and economic reality” was that such payments reduced insureds’ wage bills by 80% [174]; (2) applying the concurrent causation approach from FCA v Arch Insurance (UK) Ltd [2021] UKSC 1, such payments were “in consequence of” the insured peril [183-187]; (3) unlike purely benevolent or ex gratia payments, CJRS funds were not collateral benefits excluded from savings clauses [188-191].

Endnote

The decision refines the principles articulated in the FCA test case, providing essential guidance for practitioners in future business interruption disputes and reinforcing the underlying risk allocation mechanism in indemnity insurance relationships. The ruling’s approach to furlough payments has significant implications for ongoing pandemic-related insurance disputes.

Read the full judgment at Liberty Mutual Insurance Europe SE & Ors v Bath Racecourse Company Ltd & Ors [2025] EWCA Civ 153