Four pub owners are entitled to be compensated by Insurer FBD for the disruption their businesses suffered due to the Covid-19 pandemic the High Court has ruled.
In a landmark decision, the outcome of which affects claims made by some 1,000 Irish pubs and restaurants, Mr Justice Denis McDonald found that a policy sold by FBD covered losses the pubs sustained by having to close due to the global health emergency.
In a lengthy and detailed judgement delivered on Friday the judge disagreed with FBD's interpretation of its policy and said 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
The issue of quantifying the losses, the judge said will be dealt with at a later date.
Test actions
The 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.
The fourth action was taken by Leinster Overview Concepts Ltd the owner of Sean's Bar, which is based in Athlone, Co Westmeath.
The publicans challenged FBD Insurance Plc's refusal to indemnify them, as well as the insurer’s stance that its policies of insurance did not cover the disruption caused to businesses by Covid-19.
The dispute arose after the insurer refused to provide policyholders with cover after the pandemic resulted in the first temporary closure of businesses, in mid-March 2020.
Judgment in the case, which took several weeks to hear, was due to be delivered in January.
The decision was deferred to allow the parties make submissions to the court arising out of a judgment from the UK's Supreme Court where similar issues were raised.
Breach of contract
Each of the pub owners claimed that under their policies of insurance taken out with FBD they are entitled to have their consequential losses covered by what they claimed is an insurable risk.
They also claimed that by failing to pay out on the policy the insurer was in breach of contract.
The publicans claimed the policies taken out with FBD contain a clause 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".
FBD disputed the claims and argued that the closures did not occur as a result of an outbreak of disease at the premises or areas where the pubs are located.
FBD also told the court that it has never provided cover for pandemics and no one in Ireland has ever asked for it.
The general insurance market in Ireland does not insure against events like pandemics, it claimed.
Only specialist brokers, which he said are based overseas, on a bespoke basis offer an insurance policy that cover the fall-out from something like Covid-19, FBD also argued.
'Should never have come to this'
Reacting to the decision, Noel Anderson, managing director of Lemon & Duke pub said "the High Court’s decision represents vindication for Lemon & Duke and the other businesses dependent on the outcome of this action."
“It should never have come to this. I specifically had taken out a business interruption policy to protect us against Covid-19 and its potential impact on our business. As the court heard during the trial, this was acknowledged in writing by FBD.
“Yet in order to have our claim settled we were forced to go through 10 months of deep financial uncertainty, significant additional risk in taking this action as well as extensive stress and strain to arrive at an outcome which should have been clear from the outset.
“We would encourage FBD and other insurance providers to reflect on the outcome of this case and where valid business interruption policies exist we hope they will be forthcoming in making payments to the relevant pubs and other businesses impacted as they fight for their survival,” Mr Anderson said.
Welcome news
Tánaiste Leo Varadkar said the decision by the High Court will be “welcome news” for small businesses.
He tweeted: “Very significant judgment in a major test case. Will be welcome news for small businesses across Ireland forced to close because of the pandemic.”
Padraig Cribben, chief executive of the Vintners’ Federation of Ireland, said: “We welcome this outcome and call on all insurers underwriting in Ireland to move urgently now to settle all valid business interruption claims arising from Covid-19, to review all claims already declined and to inform all policyholders who have a valid claim that this is the case.
“To string any further clearly valid claims out by dragging cases into litigation or to the ombudsman would be unconscionable at this stage and must be subject to aggravated damages when resolved.”
The Alliance for Insurance Reform also welcomed the decision. Peter Boland, director of the Alliance, said: “Equally we call on the Central Bank to demonstrate that safeguarding consumers is a priority by publishing an update on the work they have carried out under their Covid-19 and Business Interruption Insurance Supervisory Framework.
“Keeping that work under wraps merely facilitates insurers determined to minimise their exposure to valid Covid-19 related business interruption claims.”
