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Covid-19 BI insurance: aggregation of loss and deductions for government support

20th Oct 2022

Greggs Plc v Zurich Insurance Plc [2022] EWHC 2545 (Comm)

This was one of three preliminary issues trials heard sequentially on an expedited basis in order to determine common issues of principle relating to insurance cover for Covid-19 business interruption losses. This particular action concerns the business interruption policy issued by Zurich to Greggs.

It was common ground that Greggs was entitled to cover in respect of its Covid-19 business interruption losses in 2020, which were pleaded by Greggs to be a sum in excess of £150m. Two principal issues arose at the preliminary issues trial: (i) whether those losses arose out of one or more “single occurrences” for the purposes of aggregation; and (ii) whether the government support which Greggs received in the form of furlough payments and business rates should be taken into account in calculating its indemnity.

Butcher J held that losses fell to be aggregated by reference to the government response to Covid-19, with governmental announcements and measures being capable in principle of amounting to a separate “single occurrence”. The Judge rejected arguments that there is aggregation by reference to the emergence of the virus in Wuhan, the outbreak of the virus in Wuhan and/or the arrival of the pandemic in the UK, on the ground that they were not occurrences or that such occurrences were too “remote – geographically, temporally and causally”, although the Judge accepted that “the outbreak in Wuhan, can be said to have had a causal link to Greggs’ losses”.

The practical effect of the Judge’s decision is that the major part at least of Greggs’ losses during the first Covid-19 lockdown in early 2020 arose out of or were connected to a “single occurrence” and were therefore subject to a single £2.5m limit. The Judge considered that certain government measures imposed later in the year which made material changes to pre-existing restrictions constituted separate occurrences. However, measures which continued or reduced restrictions did not constitute a separate occurrence. The Judge rejected Greggs’ arguments that each of the 120 announcements and measures pleaded by Greggs constituted a separate “single occurrence” for the purposes of aggregation and that there was a separate occurrence in respect of each individual case of Covid-19.

With regard to the government support issue, the Judge also accepted Zurich’s submission that furlough payments and business rates relief received by Greggs in 2020 should be taken into account in calculating its indemnity. Such government support amounted to approximately £103m, which effectively extinguishes the majority of Greggs’ alleged loss.

Peter MacDonald Eggers KC, Sandra Healy and Douglas Grant acted for Zurich, instructed by Mark Wing and Rosalie Hart of Clyde & Co.