Greggs wins high-profile High Court Covid insurance case

The Newcastle headquartered firm Greggs has won an initial High Court ruling in a £150m Covid related case against the insurance company, Zurich.

Greggs’ claim was over its business interruption insurance with Zurich in which the firm claims it is due monetary compensation for interruption during the Covid pandemic.

Greggs £150mn claim

Greggs lodged its claim in the High Court for the sum of £150mn which it claims it is owed as compensation for when its estate of over 2,000 outlets and stores was forced to close during Government mandated lockdowns.

Lawyers acting for Greggs, a British company employing around 25,000 staff across its 2,000 plus shops and other outlets, told the court that every single outlet suffered some interruption or interference with trading during the government imposed lockdowns.

Zurich’s defence

Zurich on the other hand, claimed that Greggs could only claim for one single occurrence of business interruption compensation under its policy, a position that if upheld would limit Gregg’s claim to £2.5mn.

Greggs’ lawyers counter argued that the company was entitled to a separate limit of £2.5m each time the UK and the national devolved Governments announced new Covid restrictions.

The judgement

Mr Justice Butcher has now handed down his judgement in which he says:

“In substantial measure I have accepted what was put forward at the hearing as Greggs’ primary case, based on the different Governmental announcements/regulations.”

Impact on Greggs’ profits

Following the first lockdown commencing March 2021, the fast food chain now famously providing its customers with vegan sausage rolls, posted its first ever full-year losses since the company came to be quoted on the stock market in 1984. The company posted a £13.7m pre-tax loss, compared to a profit pre-pandemic in 2019.

The company weathered the storm better than most business in the sector and its losses were not as big as the analysts had forecast, but still resulted in the directors failing to approve a dividend payment to stockholders until profits returned. Profits fell from record highs of over £1bn pre-pandemic in 2019 by around 30 percent.

The judge in the High Court case ruled that there had been a “single occurrence” at the first lockdown from March 2020 to May 2020, followed by separate occurrences in each jurisdiction in the UK as the restrictions were changed over the rest of the year. He also said that there were other separate occurrences within each jurisdiction where the local lockdowns and other restrictions had been imposed.

The lawyers’ response

A spokesperson for lawyers Charles Russell Speechlys, the firm acting for Greggs in the landmark BI trial, said:

“today’s judgment substantially accepts Greggs’ primary case for payment of business interruption and related losses caused by Covid-19 and its consequences.”

Insurers’ initial argument that there was only one limit available for Covd BI losses, entitled Greggs to only one limit of £2.5 million for all of its Covid BI losses had been “firmly rejected”, the firm said.

For its part, Greggs argued that it was entitled to access a separate limit of £2.5 million each time the Westminster and devolved Governments in the UK adopted a major Covid restriction measure affecting its business. This meant that there were multiple such restrictions and multiple £2.5 million limits.

The Lawyers Charles Russell Speechlys said the judge accepted the “main thrust” of Greggs’ primary case and ruled that there was a single occurrence at the outset (from March 2020 until May 2020).

This was followed by separate occurrences in each jurisdiction within the UK as the level of major restrictions in place was adjusted from time to time over the course of 2020 and also separate occurrences within each jurisdiction where there were local lockdowns or other restrictions.

The judge also held that those regulations which merely continued existing restrictions or made small changes did not provide additional £2.5 million limits.

The case has winder implications

“This outcome vindicates Greggs commencing proceedings and has wider implications for all businesses that purchased the Resilience Insurance policies. Insurers’ argument that there was only one limit available for COVID business interruption losses has been firmly rejected,” said Charles Russell Speechlys’ partner, Manoj Vaghela.

Subject to appeal, the firm said that the case of ‘Greggs plc v Zurich Insurance plc’ will now proceed to phase two, in which insurers and Greggs will calculate the value of the business interruption loss recoverable under the insurance policy.

The High Court also ruled on business interruption cases brought by The Stonegate Pub Company Ltd vs MS Amlin, Liberty Mutual Insurance Europe and Zurich, plus Various Eateries vs. Allianz Insurance Plc, with varying degrees of success.