Liberty Mutual Insurance Europe SE v Bath Racecourse Company Ltd[2025] EWCA Civ 153
The Court of Appeal has handed down judgment in an important COVID-19 business interruption case, just three weeks after the hearing took place. There were two main issues that were considered in the appeal in Liberty Mutual Insurance Europe SE -v- Bath Racecourse Company Limited and others [2025] EWCA Civ 153. First, whether each insured entity within a group of companies under a composite policy is entitled to claim its own separate limit of indemnity. Second, and considered for the first time by the Court of Appeal, whether furlough payments received by policyholders during the pandemic can be deducted by insurers from their payouts to policyholders.
The Court’s decision on both issues will have significant ramifications for many large policyholders who have suffered COVID-19 business interruption losses, especially where claims have been on hold pending the outcome of these points.
Another win for composite insurance policyholders…
Insurance policies often list multiple insured entities within a group in a single policy document, even though the named insureds under the policy operate different businesses across different locations.
On this issue, the Court concluded that separate limits of indemnity were available for each named insured. In each of the claimant policyholders’ wordings the policy listed (i) separate aggregate limits for each of the insured premises (Bath) and (ii) the insured companies as “Named Insureds” and “Additional Named Insureds” (Starboard). Insurers argued that although each policyholder had a separate contract of insurance, the contracts were interrelated, and an aggregate limit of indemnity applied, which was to be shared between the insured businesses. Policyholders argued that there were separate policies of insurance. Taking a commercial common-sense approach, policyholders expected any limits to be applicable to their own insured interest.
The Court of Appeal found in favour of policyholders stating that the policies “are to be construed as applying to each insured policyholder separately, in other words the “Business” with which there has been interruption or interference is the business of that insured and no other “Premises” affected are those of that insured and no other”.
This confirms that policyholders with composite policies of insurance have a distinct interest in their own premises and business and do not have any interest in the premises and businesses operated by other insureds (even within the same group), and in turn, the limits of indemnity are not shared between the entities.
The Court of Appeal’s judgment in this case necessarily means that composite insurance policies provide separate limits of indemnity. However, the Court of Appeal also made clear that this decision was based on the policies in question. If the policy wording clearly set out that there was only one shared aggregate limit and there were provisions to deal with priority of competing claims, the courts will look to specific provisions in the policy.
...but a loss for policyholders on furlough
The second issue concerned whether payments received by businesses from the Government to fund the furloughing of staff during the pandemic should properly be deducted from the amount of indemnity payable by insurers to the policyholder businesses. Here, the Court of Appeal found in favour of insurers.
The Court held that at a time when policyholders accepted furlough payments, they were, in effect not paying for the wages of their staff. The wages were funded via furlough payments made by the Government. In turn, the charges or expenses of the business were reduced.
The economic and commercial reality meant that policyholders’ wage bills were reduced, and there were “savings” within the meaning of the relevant savings clause in the policy.
What to look out for
Policyholders with composite policies of insurance – who are still able to make or reopen claims - should take steps urgently to check wordings to assess whether applicable limits apply to multiple insureds on a per entity basis as opposed to being subject to a single indemnity to be split amongst them all. This judgment has the potential to unlock significant sums of additional cover, however for any unresolved claims, consideration must be given to the limitation period set to arise in or around March 2026.
Both appeals considered in this case remain subject to appeal to the Supreme Court.
If you have any questions concerning the material discussed in this client alert, please contact the members of our Insurance Recovery practice.
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