Pizzaexpress Group Ltd v Liberty Mutual Insurance Europe SE
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 26 May 2023 |
| Neutral Citation | [2023] EWHC 1269 (Comm) |
| Docket Number | Case No: CL-2022-000400 |
| Court | King's Bench Division (Commercial Court) |
[2023] EWHC 1269 (Comm)
Mr Justice Jacobs
Case No: CL-2022-000400
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Tom Weitzman KC and Peter Ratcliffe (instructed by Dechert LLP) for the Claimants
David Scorey KC and Sushma Ananda (instructed by DAC Beachcroft LLP) for the Defendants
Hearing date: Friday 19 th May
Approved Judgment
This judgment was handed down remotely at 10 am on Friday 26 th May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
A: The parties and the proceedings
The present proceedings are brought by companies in the well-known PizzaExpress restaurant group (together “PizzaExpress”) against two insurers, Liberty Mutual Insurance Company SE and XL Insurance Company SE (“the Insurers”), in respect of COVID-19-related business interruption losses. The relevant policy (“the Policy”) is an Aon Trio Property and Business Interruption insurance policy covering the period 1 July 2019 to 30 June 2020. The terms of the Policy are contained in a Schedule dated 22 July 2019, a standard-form Aon Trio Property and Business Interruption wording, and Endorsement No.1 dated 21 June 2022.
At a case management conference on 3 March 2023, the court ordered the determination of a preliminary issue concerning the construction of the Policy provisions relating to the policy limits, as follows:
“On the true construction of the Policy, do the Sub-limits applicable to Extension 2(a)(i), Extension 2(b)(v) and to Claims Preparation Expenses apply any one Occurrence (as the Defendants submit) or any one Incident (as the Claimants submit) or on such other basis as the Court may identify?”
The dispute between the parties on policy limits is significant in financial terms. PizzaExpress's claim is for around £82 million pursuant to the ‘at the premises’ cover provided by Extension 2(a)(i) of the Policy, and/or for around £178 million pursuant to the ‘prevention of access’ cover provided by Extension 2(b)(v) of the Policy. These claims are made on the basis that the relevant policy sub-limits do not operate on the basis of “any one Occurrence”, a term which is broadly defined in the Policy so as to encompass “any one loss or series of losses arising out of and directly resulting from one source or original cause”. The Insurers contend that PizzaExpress's business interruption losses flowing from the COVID-19 pandemic, if covered at all, would constitute 1 or at most 3 Occurrences, giving rise to a maximum indemnity (prior to application of the Policy excess) of either £ 250,000 (for 1 Occurrence) or £ 750,000 (for 3 Occurrences), together with £ 50,000 for Claims Preparation Expenses (again applying “any one Occurrence”). PizzaExpress contend that the relevant sub-limit provisions do not so confine their claims.
The factual background to the claim is that in early 2020 PizzaExpress operated some 475 restaurants in England, Scotland, Wales, Northern Ireland, the Republic of Ireland and Jersey. A large majority of the restaurants (417) were in England. PizzaExpress claims for business interruption losses suffered between March and November 2020 as a result of closures or restrictions on the use of its restaurants, caused by measures introduced in response to the COVID-19 pandemic by the governments in each of the territories in which the restaurants were situated.
PizzaExpress's principal claims are made under two extensions in the Business Interruption (or “BI”) section of the standard Aon Trio policy wording. Broadly speaking, these extensions extend cover beyond what might be regarded as the ordinary type of business interruption loss which arises when there is covered physical damage to a policyholder's premises. Extension 2(a)(i) provides cover in respect of “any occurrence of a Notifiable Human Disease at the Premises… that causes restrictions on the use of the Premises on the order or advice of a statutory, local or other competent authority”. Extension 2(b)(v) provides cover in respect of the “closure or sealing off of the Premises … by the police, fire brigade or other statutory authority or local or transport authority due to an emergency event at the Premises or within a radius of 1 mile of the Premises… which… prevents or hinders the use of the Premises or access thereto…”. The Policy contains a number of other extensions, which are referenced in the sub-limits provisions described below.
The Insurers have denied coverage under both extensions, contending (among other things) that the cover provided by the extensions is “localised cover” which does not respond to business interruption losses caused by central government action taken in response to a nationwide public health emergency.
As part of the Commercial Court's management of its COVID-19 business interruption insurance sub-list, issues of construction relating to the coverage provided by the two extensions have been ordered to be determined as preliminary issues in co-ordination with similar issues arising in other COVID-19 business interruption insurance cases. Thus, I recently heard argument over 7 days in a trial of preliminary issues relating to the correct construction of the ‘at the premises’ cover provided by Extension 2(a)(i), and by similar clauses in five other sets of proceedings, with judgment reserved. A trial of preliminary issues relating to the correct construction of the ‘prevention of access’ cover provided by extension 2(b)(v), and by similar clauses in at least five other set of proceedings, will be heard later this year, commencing on 23 October 2023, and will occupy around 8 days.
B: The Policy terms
The key relevant provisions of the Policy concerning limits and sub-limits are contained in the Schedule to the Policy. The Schedule describes the insured, the insurers, the period of insurance and a number of other matters. Page 3 of the Schedule is headed “Section 1. Property Damage”. This comprises a table with 4 columns, columns headed “Property Insured Item”, “Declared Value”, “(% uplift)”, and “Limit of Liability”. Thus, by way of example, the table lists “Buildings” as a Property Insured Item, with a Declared Value of £ 5,759,184, an uplift of 125% and a Limit of Liability of £ 7,198,980. There were then entries for “Machinery and Plant” and “Stock”. These various figures were not broken down by reference to individual restaurant premises, but were composite figures for the business as a whole.
The next page (page 4) is headed: Section 2: Business Interruption. It provides as follows (including certain text in bold):
“ Section 2: Business Interruption
Item
Maximum Indemnity Period
Estimate
(% uplift)
Limit of Liability
1 Insured Gross Profit
12
GBP
360,101,515
(133.33%)
GBP
480,123,351
2 Gross Revenue
(133.33%)
3 Additional Increased Cost of Working
12
GBP 250,000
(100%)
GBP 250,000
4 Contractual Penalties
6
GBP 100,000
5 Research and Development Costs
6
GBP 100.000
6 Standalone Increased Cost of Working
7 Additional Increased Cost of Working Hunton House, Highbridge Estate, Oxford Road, Uxbridge
12
GBP 500,000
(100%)
GBP 500,000
8 Additional Increased Cost of Working Enterprise House, Cotswold Dene, Standlake, Witney
12
GBP
1,000,000
(100%)
GBP
1,000,000
9 Advance Profits
12
GBP
1,000,000
(100%)
GBP
1,000,000
10 Rent Receivable
12
GBP 469,486
(100%)
GBP 469,486
N.B. Additional limits and/or sub-limits apply – these are listed later in this Schedule”
The various “Item” headings in this table, such as Insured Gross Profit, are referable to various detailed provisions of Section 2, the Business Interruption section, of the Aon Trio wording.
Page 5 of the Schedule is headed: “Sub-limits”. It is again a table, and this went over the page so as to conclude on page 6. The following parts (again including text in bold where it appears in the document) are material to the arguments advanced at the hearing.
...“ Sub-limits
— Sub-limits form part of the Limit of Liability and do not apply in addition to it;
— all Limits of Liability apply any one Occurrence;
— limits are inclusive of the Excess;
unless otherwise stated. If more than one Sub-limit applies to the same loss, the Insurer's liability will be limited to the lesser Sub-limit.
In respect of Section 1 & 2 combined limits
Automatic Acquisitions
GBP 500,000 applying in addition
Claims Preparation Expenses
GBP 50,000 applying in addition
Differences in Conditions/ Differences in Limits
GBP 150,000 applying in addition
Inadvertent Omission to insure
GBP 2,000,000 applying in addition
In respect of Section 1
…
Employees', directors' and visitors' personal effects
GBP 1,000 per person
…
Loss of License
GBP 25,000 per Premise
…
Mitigation of Environmental Impact
5% of the Damage or GBP 100,000 applying in addition whichever is the less.
…
Motor Vehicles
GBP 100,000 applying in addition
Resilient Repairs – Extra Costs
5% of the Damage or GBP 100,000 applying in addition, whichever is the less
…
…
In respect of Section 2
…
Extended Incident
— Notifiable disease
GBP 250,000
— Prevention of Access & Loss of Attraction
GBP 250,000
…
…
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