UnipolRe v Covéa Insurance; Markel International v General Reinsurance
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 09 February 2024 |
| Neutral Citation | [2024] EWHC 253 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case Nos: CL-2023-000132 & CL-2023-000159 & CL-2023-000494 |
[2024] EWHC 253 (Comm)
Mr Justice Foxton
Case Nos: CL-2023-000132 & CL-2023-000159 & CL-2023-000494
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Aidan Christie KC and Jocelin Gale (instructed by DWF Law LLP) for UnipoleRe
Alistair Schaff KC and Simon Kerr (instructed by Slaughter and May) for Covéa
Rebecca Sabben-Clare KC (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for Markel
Dominic Kendrick KC and Rebecca Jacobs (instructed by DLA Piper UK LLP) for General Reinsurance
Hearing dates: 11 and 12 January 2024
Draft Judgment Circulated: 30 January 2024
Approved Judgment
This judgment was handed down remotely at 10.00am on 09 February 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
THE HONOURABLE Mr Justice Foxton
The Honourable
A INTRODUCTION
A1 The appeals
This judgment is given in two appeals brought under s.69 of the Arbitration Act 1996:
i. The appeal by the Claimant formerly UnipolRe Designated Activity Company ( “UnipolRe”) against a Partial Final Arbitration Award of 24 July 2023 ( “the Covéa Award”) determining issues of principle regarding the treatment of claims by Covéa under a Property Catastrophe Excess of Loss Reinsurance (“ the Covéa Reinsurance”) for indemnity against business interruption losses caused by the Covid-19 pandemic.
ii. The appeal by Markel International Insurance Company Limited ( “Markel”) and cross-appeal by General Reinsurance AG ( “General Reinsurance”) against a Partial Final Arbitration Award of 27 January 2023 ( “the Markel Award”) determining issues of principle regarding the treatment of claims by Markel under a Property Catastrophe Excess of Loss Reinsurance (“ the Markel Reinsurance”) for indemnity against business interruption losses caused by the Covid-19 pandemic.
In very broad terms, the appeals raise the following issues:
i. First, whether the Covid-19 losses for which Covéa and Markel sought indemnity under, respectively, the Covéa and Markel Reinsurances, arose out of and were directly occasioned by one catastrophe on the proper construction of the Reinsurances. Both the Covéa and Markel Awards found that they did.
ii. Second, whether the effect of the respective “Hours Clauses” in the Covéa and Markel Reinsurances, which confined the right to indemnity to “individual losses” within a set period, had the effect that the reinsurances only responded to payments in respect of the closure of the insured's premises during the stipulated period. The Covéa Award found that this was not the effect of the “Hours Clause” in the Covéa Reinsurance. The Markel Award found that this was the effect of the “Hours Clause” in the Markel Reinsurance.
The losing parties appealed against those findings. Markel and General Reinsurance consented to both parties having permission to appeal on the point on which they had lost (as recorded in a Consent Order dated 21 March 2023). I granted UnipolRe permission to appeal on 25 October 2023 and, after holding a directions hearing in both cases, I ordered that the hearings should be heard before the same judge on consecutive days, with the parties to both appeals having access to and the ability to make submissions on the materials deployed in the other appeal.
These remain separate appeals, and the conduct of the arbitral references and (to a lesser extent) the arguments on the appeal differed to some extent. However, the substantial overlap between the issues and the matters relevant to their determination has led me to conclude that I should produce a single judgment resolving both appeals, recognising as appropriate within that judgment the differences between them. While the Markel Award came first in time, the appeal against the Covéa Award involves a single applicant, against an award in which the issues are canvassed at somewhat greater length. For that reason, I have reversed the chronological order of the appeals in this judgment.
A2 Section 69 of the Arbitration Act 1996
The following principles were common ground in both appeals as to the proper approach of the court to a s.69 application (and, to the extent that they were not, I find that these are the applicable principles):
i. As s.69(1) makes clear, the issue of law must be one “arising out of an award made in the proceedings”.
ii. Where a tribunal's experience assists it in determining a question of law, “the court will accord some deference to the tribunal's decision” ( Silverburn Shipping (IOM) Ltd v Ark Shipping Co LLC (The Arctic) [2019] EWHC 376 (Comm), [20]).
iii. Where the arbitral tribunal's decision is one of mixed fact and law, the court cannot interfere unless it is shown that the arbitral tribunal either erred in law or reached a conclusion on the facts which no reasonable person, applying the relevant law, could have reached. It is not enough that the court would or might not itself have reached the same conclusion ( Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd (The Sylvia) [2010] EWHC 542 (Comm), [54]). In short, it must be shown that the conclusion reached by the arbitral tribunal is “necessarily inconsistent” with the correct application of the relevant legal principle.
iv. Provided the substance of the point of law remains the same as that for which permission to appeal has been granted (or consented to), the court will permit minor refinements to the formulation of the issue at the hearing which involve no prejudice to the respondent ( Cottonex Anstalt v Patriot Spinning Mills Ltd [2014] EWHC 236 (Comm), [20]).
v. The only admissible documents on the appeal are documents which are referred to in the award and which the court needs to read to determine the issue of law arising out of the award: ibid, [27].
vi. A respondent to an appeal under s.69 of the 1996 Act can seek to uphold the award on grounds not expressed in the award only where those grounds are based on a point or points of law ( CTI Group Inc v Transclear SA (The Mary Nour) (No 2) [2008] 1 Lloyd's Rep 250, [13]).
A3 The background to the Covéa Award
The following summary is taken from the Covéa Award, and paragraph references are to the award.
Covéa provided cover to policyholders engaged in the business of running nurseries and childcare facilities, including under a standard NurseryCare Policy wording ([5]). The NurseryCare Policy “covered the wide miscellany of risks that are commonly found in commercial cover written by a property department”[28], including cover for “business interruption caused by a peril other than physical damage to insured property” [35]), referred to by the Covéa tribunal as “non-property damage business interruption”.
So far as the development of the Covid-19 pandemic is concerned, the tribunal was provided with “a detailed agreed chronology” ([17]) which revealed “[a] growing sense of crisis during the second half of February 2020 leading to an explosion of cases within the UK during the first half of March 2020” ([18]).
“By 16 March, the date of the Prime Minister's broadcast and his advice to avoid non-essential social contact and travel, to work from home and to avoid all social venues, the number of cases along with the predicted rate of exponential increase in infections were threatening to overwhelm the NHS and to lead to many thousands of deaths” ([18]).
“By March 2020, the Covid-19 pandemic had swiftly developed into a disaster engulfing the whole of the UK” ([18]).
It was not until 2 March 2020 that the UK recorded its first death of an individual who had tested positive for Covid-19 and not until 5 March 2020 that Covid-19 was made a “notifiable disease” ([20]).
On 18 March 2020, SAGE concluded that the evidence “now supports implementing school closures at a national level as soon as practicable to prevent NHS intensive care capacity being exceeded” ([21]).
The UK Government's instruction to close all schools, colleges and early years facilities in England with effect from Friday 20 March was issued on 18 March 2020 ([21]) and endorsed in law by the Health Protection (Coronavirus, Restrictions) (England) Regulations on 26 March 2020 ([21]). I shall refer to the order of 18 March 2020 as the 18 March Closure Order.
On 16 April 2020, those restrictions were renewed for a further three weeks ([22]).
On 1 June 2020, the phased reopening of schools, colleges and nurseries began in England ([22]).
“On 23 June 2020, the Prime Minister announced the lifting of all restrictions with effect from 4 July (effectively ending the first lockdown)” ([22]).
By 8 June 2023, Covéa's paid losses under nursery care policies amounted to £69.3m plus £3.2m in loss adjuster's fees, and Covéa sought indemnity for those losses under the Covéa Reinsurance ([5]).
UnipolRe raised two objections of principle to payment ([6]) which I have outlined at [2] above.
Those issues of principle were determined by an arbitral tribunal chaired by Michael Crane KC and comprising lawyers with great experience of reinsurance law and the reinsurance industry ([4]).
In addition to the detailed agreed chronology, both parties called expert evidence on market practice and understanding relevant to the questions of construction before the tribunal ([23]).
Covéa's principal case was that “the outbreak of cases of Covid-19 in the UK in the period immediately preceding the closure of schools and nurseries on 20...
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