Cosgrove Gaynard Solicitors

A recent decision of the UK Supreme Court means many policy holders in the UK will now be able to recover losses for business interruption caused by the Covid 19 pandemic.

The Financial Conduct Authority in the UK brought a case on behalf of policy holders as many claims had been rejected due to the specific wording in their business interruption insurance policies. The case was first brought to the High Court to seek clarity for policy holders in September 2020 after many businesses found insurers had taken a very narrow view  of their business interruption policies and were unable to recover any loss incurred due to the pandemic. The case was then appealed to the Supreme Court who gave their judgement on  15 January 2021.

The Supreme Court ruled on multiple different policy types, provided guidance and clarity on interpreting business interruption policies however reiterated that cases must still be looked at individually against the decision and each case will turn on its own right and indeed the specific wording and circumstances surrounding each claim.  That said, the result of the judgement is that it will be more difficult for insurers to deny cover or reduce pay outs to policy holders. The decision means a lot more policy holders will have valid claims under their business interruption policies and pay outs will be greater than originally anticipated.

Whilst this UK decision is not binding here in Ireland, it is likely to be considered as a persuasive authority in the first test case brought by four publicans against FBD.  Indeed some of the courts interpretations should provide guidance in relation to other insurers and policies operating in the Irish market.

The test case against FBD arose from a decision by the Insurer to exclude the Covid-19 virus from its coverage for business interruption stating that its insurance policies do not cover the disruption and temporary closures caused by Covid 19.  

The policy holders argue that that they are entitled to claim on foot of the clause that states that they will be  indemnified if their premises is closed by order of the local or Government Authority or there are “Outbreaks of contagious or infectious diseases on the premises or within 25 miles of same” and that therefore they are entitled to have their consequential losses covered by what they claim is an insurable risk. They also claim that by failing to pay out on the policy, FBD are in breach of contract. FBD claims that the closures did not occur as a result of an outbreak of disease at the premises or areas where the pubs are located and instead is a result of directions given by the Government in an effort to stem the spread of a virus.

Of note is the fact that the Supreme court in the UK case considered the meaning of the phrase which stated that the insurer would only be liable for loss arising “at those premises which are directly affected by the occurrence ,discovery or accident”. Whilst the insurers argued that it should be shown that the business interruption was not as a result of a general occurrence or government restrictions and that instead the occurrence should be show to be within the area, the court rejected this argument and held that it does not mean that the occurrence had to have occurred “on” the premises. ‍

Another issue to be considered by the Court is the applicable indemnity period for claims for those affected. FBD has argued that the indemnity period should be limited only to when the policy holder’s premises must be physically closed whereas the argument made by the policyholders is that the indemnity period should apply from the date of the first closure and include all periods of subsequent lockdown, as well as periods where the affected premises operated at reduced capacity.

 Again the UK court considered what could be deemed tov be “interruption” and held that it did not require a complete shut down of business.

The Irish Court was due to give its judgment on the same day as the UK Supreme Court decision on 15 January 2021 but has held  same until 5 February 2021 to allow both sides to prepare and exchange submissions on the UK Court’s findings.

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Shane Walsh, Solicitor

Melissa Cowman, Legal Executive

Cosgrove Gaynard Solicitors