The High Court has ruled that four pub owners are entitled to be compensated by Insurer FBD for the disruption their businesses suffered due to the Covid-19 pandemic.
The legal action was taken following a dispute between FBD and policy holders when the insurance company said it would not provide policy holders with cover in relation to the pandemic that lead to the initial closure of businesses during mid-March 2020. Due to this disagreement four test actions were taken by Dublin bars Aberken, trading as Sinnotts Bar; Hyper Trust Ltd, trading as ‘The Leopardstown Inn’ and ‘Inn on Hibernian Way’ Ltd trading as Lemon & Duke. and Leinster Overview Concepts Ltd the owner of Sean’s Bar, which is located in Athlone, Co Westmeath.
The publicans argued against the FBD Insurance Plc’s refusal to indemnify them and the stance that its policies of insurance provided did not relate to the disruption caused to businesses by Covid-19. Judgement was due to be delivered during January. However this was deferred in order for the parties involved make submissions to the court arising out of a judgment from the UK’s Supreme Court where similar issues were dealt with.
In the legal action the pub owners argued that, as per their policies of insurance with FBD, they are entitled to have their consequential losses covered by an insurable risk and that the insurer was in breach of contract by refusing to pay out on the policy. They argued, through their legal teams, that a clause was included in the FBD policies that states the pubs will be indemnified if their premises were closed by order of the local or Government Authority if there are “Outbreaks of contagious or infectious diseases on the premises or within 25 miles of same.”
Refuting these arguments, FBD informed the judge that they were of the belief that the business closures did not arise due to an outbreak of disease at the premises or areas where the pubs are located and added that it (FBD) has never provided cover for pandemics and no-one in Ireland has ever requested such cover. FBD’s legal argument went as far as claiming that the general insurance market in Ireland does not insure against pandemic-like events. Such cover is only made available by specialist brokers, mos tof which are based in other jurisdictions, on a bespoke basis.
As the policy provided by FBD makes provision for business losses to pubs that have been ordered to shut due to the pandemic, the knock-on effect of the ruling made by Justice Denis McDonald could be compensation paid out to around 1,000 Irish pubs and restaurants. Justice McDonald’s judgement delivered found that FBD’s interpretation of its policy, that cover is not lost where the closure is prompted by nationwide outbreaks of disease provided that there is an outbreak within the 25 mile radius and that outbreak is one of the causes of the closure, is not correct.
Following the ruling the judge said that the issue of quantifying the specific losses will be managed in due time.
A representative for FBD released a statement which said: We understand the significant challenges our public house insurance policyholders currently face. FBD will arrange interim payments to affected policyholders while awaiting final clarity on quantum. We will now consider the effects of the judgment with our reinsurers and will revert to the market in due course on the estimated net cost of Covid-19 related business interruption claims to the company. We expect the cost to be well within the range of considered financial outcomes, with FBD remaining strongly capitalised. FBD believes that the court process was the fairest way to reach a resolution in this matter and tried to ensure that proceedings were as quick and efficient as possible for all concerned.
Licensed Vintners Association chief executive Donal O’Keeffe released a statement which said that the four publicans who took the test cases “deserve enormous credit, as their action will prove critical to pubs with similar policies right around Ireland”.
He added: “It was grossly unfair that these family businesses had to go to the High Court against the might of a publicly-quoted insurer to have their claims validated. We are now calling on insurers to quickly review their business-interruption policies in light of today’s decision and to promptly pay all valid claims.”