The Irish Commercial Court has deferred judgment in a number of test business interruption insurance cases taken against FBD Insurance plc (FBD) by a number of well-known pubs (Proceedings). The plaintiffs in the Proceedings have claimed that losses arising from the government enforced closure of pubs arising from COVID-19 in 2020 were covered by their business interruption policies. In defending the Proceedings, FBD has disputed the claims.
Mr Justice McDonald was due to deliver his judgment in the Proceedings on 15 January 2021, but this has been deferred to allow the parties make legal submissions following the UK Supreme Court’s judgment in a similar test case, which was also delivered on 15 January. It is anticipated that the recent judgment of the UK Supreme Court will have implications for the Proceedings taken against FBD.
In its judgment, the UK Supreme Court ruled in favour of the UK’s financial regulator, the Financial Conduct Authority (FCA) and insured businesses, finding that:
- the “disease clause” provided cover for business interruption caused by any cases of illness resulting from COVID-19 that occurred within a specified radius of the business premises;
- an instruction given by a public authority, such as the UK Prime Minister’s statement of 20 March 2020 instructing named businesses to close “tonight”, may amount to a “restriction imposed” if it carries the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers;
- in relation to the “prevention of access” and “hybrid clauses”, business interruption losses are covered only if they result from all the elements of the risk covered by the clause operating in the required causal sequence. However, the fact that such losses were also caused by other (uninsured) effects of the COVID-19 pandemic does not exclude them from cover under such clauses; and
- in accordance with its interpretation of the “trends clauses”, adjustments should only be made to reflect circumstances affecting the business which are unconnected with COVID-19.
Interpreting the UK Supreme Court judgment, the FCA has stated that cover may be available for partial closure of premises (as well as full closure) including for mandatory closure orders that were not legally binding. Furthermore, according to the FCA, valid claims should not be reduced because the loss would have resulted in any event from the pandemic and that, as a result, more policyholders will have valid claims and some pay-outs will be higher.
It is expected that Mr Justice McDonald will give his judgment in the FBD test cases on 5 February 2021 following consideration of legal submissions from the parties regarding the UK Supreme Court’s judgment. It has been reported that 370,000 insured businesses, some of which have Irish interests, may have been affected by the Supreme Court’s decision in the UK. It is clear that Mr Justice McDonald’s judgment will similarly have far reaching effects for both insurers and insured businesses in Ireland.