Publicians take FBD Insurance to Court over Refusal to Pay Business Interruption Compensation

The Commercial Court has heard arguments that the basis of the claims by Insurance company FBD that it is not obliged to paying publicans’ business interruption compensation due to the impact of the the Covid-19 pandemic not sufficient.

In what are being viewed as test cases, four publicans have taken legal actions against the insurance firm in relation to a refusal by FBD to indemnify them for their loss in earning. Three of the publicans are being heard in one action and another is being heard separately. The test cases are concentrating on how the insurance policy is being interpreted rather than the economic impact felt by either the claimants or the defendant.

Representing publicans for three dublin based publican, Michael Cush SC informed the court that the refusal issued by FBD was done so using the basis that the insurance policies purchased by them (the publicans) do not cover an outbreak of a disease that makes a national closure of businesses a legal requirement. The establishments that his is representing include Sinnott’s Bar; The Leopardstown Inn and Lemon & Duke.

Defending these claims, counsel for FBD said, on behalf of their clients, that the insurance policies simply make provision for closure orders that are issued on a local, as opposed to national basis. Therefore an event such as the pandemic would not be covered by their policy.

Counsel for the publicans argued that this interpretation is “clearly wrong” as FBD appears to be claiming that “the more widespread the peril”, then the higher the likelihood that cover does not have to be provided. Mr Cush said that this claims “makes no sense”. he informed presiding judge Justice Denis McDonald that approximately 1,100 Irish pubs and bars are being placed in a precarious position due to the refusal of FBD to provide business interruption compensation following the temporary closure of the premises that was enforced from in mid-March of this year.

The separate action is being taken by the owners of Sean’s Bar in Athlone, Co Westmeath. Through counsel Eoin McCullough SC the claimants are claiming that, as per their policies of insurance with FBD, they are permitted  to have their consequential losses covered by “an insurable risk” and that FBD is in breach of contract.

FBD are disputing the argument that there is a clause in the insurance policy that says that publians shall be indemnified if their businesses are closed as a result of an order issued by a local authority or the government authority following “outbreaks of contagious or infectious diseases on the premises or within 25 miles of same”.

Legal representation for FBD, Declan McGrath SC, countered this by claiming that e closures did not occur as a result of an outbreak of disease at the premises or areas where the pubs were located but due to the measures implemented at a national level that involved a nationwide closure of business

Mr Cush SC informed that court that it is “plainly wrong” that FBD are arguing whether the scope of the policy they sold included the shutdown that came about as a result of the pandemic and, if so, what extent of the losses are covered. he added that the claims of of FBD that this businesses losses due to a pandemic were not in line with the contents of documents FBD gave to its customers outlining what is provided for by the cover.

Justice McDonald was advised that the claims being made by the proprietors of Sean’s Bar, Athlone, were similar to those made in the UK where the British High Court ruled that insurance policy payouts were triggered due to specific “non-damage” clauses that covered disease and denial of access to business premises. This ruling in currently under appeal to the UK’s Supreme Court, counsel said.

A similar action was taken by a group of Parisian restaurant owners against AXA Insurance earlier this year, in June, which resulted in the insurance company paying for three month’s worth of business losses to the policy holders. You can read more about that case here.