Stonegate Pub Company Ltd v MS Amlin Corporate Member Ltd & Ors [2022] EWHC 2548 (Comm)

Gavin Kealey KC, Adam Fenton KC, Sushma Ananda and Henry Moore successfully represented Insurers (MS Amlin Corporate Member Limited, Liberty Mutual Insurance Europe SE and Zurich Insurance Plc) in one of the most significant pieces of Commercial Court litigation this year: Stonegate Pub Company v MS Amlin & Ors (one of The Lawyer’s Top Cases of 2022).

This COVID-19 business interruption insurance claim (based on the Marsh Resilience wording) was valued by Stonegate at in excess of £1 billion. It raised a number of outstanding issues of industry-wide significance in the aftermath of the FCA test case (in which all members of the 7KBW team had acted).

The Commercial Court ordered a three-week trial of preliminary issues, the majority of which were resolved in favour of Insurers in a judgment of Butcher J.

Butcher J held that:

1. As to furlough / business rates relief, Stonegate’s arguments against deductions being made for the government support it had received were rejected. The Judge concluded both on the policy wording and as a matter of law that Stonegate would be receiving more than an indemnity if it received both the governmental support and a recovery under the Policy which ignored that support: [258]-[271], [284]-[288].
2. As to aggregation, the loss suffered by Stonegate across its UK locations in respect of the first lockdown from March 2020 was to be aggregated as a Single Business Interruption Loss and capped at £2.5 million, by reference to a single UK-wide occurrence on 20 March 2020 consisting of closure instructions that day: [189], [191]-[192]. Furthermore, there was a single UK-wide occurrence on 16 March 2020 (consisting of the decision to advise the public to keep away from pubs, etc) which could also provide a basis for aggregating these and other losses: [172]-[180], [182]. The Court’s conclusion on this point (and on causation, see below) meant that Stonegate’s recoverable loss was confined to a minuscule proportion of its quantified claim (of in excess of £1 billion).
3. As to causation, Stonegate argued that it was entitled to recover all its losses up to the end of the Maximum Indemnity Period of 30 April 2023 in the context of a Period of Insurance that expired on 30 April 2020. This argument was rejected on the facts, the expert evidence and the law. Stonegate only established proximate causation up to the reopening of venues after the first lockdown in early July 2020 (subject to very narrow exceptions): [194]-[195], [209]-[214], [225]-[230]. And any such recoverable losses after 16 March 2020 were in any event limited to £2.5 million (see aggregation, above). In particular:
   1. The Judge described Stonegate’s legal arguments based on the FCA test case as representing “a fundamental misunderstanding and misapplication of the decisions in the FCA Test Case”: [202].
   2. On the facts, Butcher J held that there was no basis for the recovery of business interruption losses caused by government action beyond the first reopenings of venues in July 2020, as the government was then predominantly reacting to more recent cases and the threat of future cases: [208]-[209]. On the expert evidence, the Judge rejected entirely Stonegate’s case that cases of COVID-19 in the period from 17 February to 30 April 2020 had a negative residual effect on the behaviour of consumers generally in any period thereafter: [214].
4. As to Additional Increased Cost of Working, Butcher J agreed with Insurers that the cover taken out by Stonegate in respect of AICW covered only ‘uneconomic’ expenditure and could not be used to supplement the ICW cover in respect of economic expenditure (i.e., where the ICW limits proved inadequate): [246]-[249]. The court agreed only with Stonegate’s argument that the AICW Sub-Limit applied per SBIL rather than in the aggregate: [233]-[235].

The practical result of the Judge’s decision is that a claim for nearly £1.1 billion has been reduced to a minuscule fraction of that sum.

Stonegate has reportedly announced that it will seek permission to appeal.

Download a copy of the judgment in the Stonegate litigation.   This judgment was handed down alongside judgments in two other preliminary issues trials determining similar (but not identical) issues on the Marsh Resilience wording:  the judgment in the Various Eateries claim and the judgment in the Greggs claim.

Gavin Kealey KC, Adam Fenton KC, Sushma Ananda and Henry Moore were instructed by Chris Wilkes and Ilana Gilbert of DAC Beachcroft LLP.