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.

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 judgment delivered on Friday, the judge disagreed with FBD’s interpretation of its policy.

He said cover is not lost where the closure is prompted by nationwide outbreaks of disease provided 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.

Mr Justice McDonald noted the significant implications that arise out of his decision for the parties and other pubs who have also claims, and accepted that one of all of the parties may appeal his findings.

Action

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; and Leinster Overview Concepts Ltd, the owner of Sean’s Bar 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.

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.

Policies

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 such as pandemics, it claimed.

Only specialist brokers, which he said are based overseas, on a bespoke basis offer an insurance policy that cover the fallout from something like Covid-19, FBD also argued.

In his judgment Mr Justice McDonald said he was holding against FBD in relation to the insurer’s interpretation of the relevant section of the policy it had offered to publicans.

He said the relevant insured peril is not confined to the imposed closure of the insured premises, but was the imposed closure following outbreaks of infectious or contagious disease, in this case Covid-19, on or within 25 miles of the premises.

He added 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”.

He rejected FBD’s claim that in order to pay out it requires the closures should be proximately caused by the outbreaks within 25 miles.

He said that the outbreaks which occurred within 25 miles of each of the plaintiffs’ premises were a proximate cause of the imposed closure of public houses announced by the government on March 15th, 2020.

Decision

The fact that outbreaks outside that 25-mile radius were also proximate causes of the Government’s decision does not alter that conclusion, he added.

The question of whether the plaintiffs’ claimed losses were proximately caused by a composite peril as described in the policy can only finally be determined at the quantum hearing, the judge added.

The court also rejected FBD’s claim that losses sustained by the plaintiffs in the days immediately prior to the imposed closure in March 2020 can be considered to constitute a trend which is to be applied for the duration of the insured peril.

The court rejected the pub’s claim that they are entitled, by reference to the definition of the indemnity period in the FBD policy, to maintain a claim against FBD for the continuing effects of the Covid-19 pandemic on their business, even after any period of imposed closure comes to an end.

They were entitled to be indemnified for such losses until the losses cease or the indemnity period comes to an end.

The judge also dismissed a claim by the Lemon and Duke owners for aggravated damages, arising out of representations it claims was made to it by FDB that coverage was available in early Match 2020 if that pub’s business was disrupted by Covid-19.

The judge adjourned the matter to a date later this month, to allow the sides consider the judgment.

He accepted that there may be a number of issues arising out of the decision that sides may wish to make further submissions on.