Covid Business Interruption Insurance Update

Many Irish businesses have been notified, by their insurance providers, of a refusal to cover their business interruption losses arising from the Covid 19 pandemic, under their business interruption policies. However a recent landmark UK case, The Financial Conduct Authority & Ors v Arch Insurance (UK) Ltd & Ors [2021] UKSC, relating to a group of UK businesses who took on some major insurance players could now have a significant impact on the Irish market.

In Ireland, four publicans have brought related cases challenging FBD Insurance plc’s stance that its policies of insurance do not cover the disruption caused to businesses by Covid-19 and their refusal earlier this year to indemnify them. This case could be hugely beneficial not only for the 1000’s of Irish pubs and bars, but for all businesses whose operations have been affected by the pandemic since March 2020.

The UK Supreme Court ruling handed down on the 15th January has now cleared the way for 370,000 UK businesses to press ahead and claim insurance pay-outs for Covid-related losses after the Court’s unanimous decision which dismissed the insurers’ appeals against a High Court ruling that they should honour the majority of claims. The original case was brought by the UK’s Financial Conduct Authority.

The decision clarified how certain Business Interruption Insurance policies were to be interpreted in the face of Covid. Similar to Irish policy holders, UK policy holders have faced rejections to cover their Covid claims from their BII providers, asserting a failure to come within the remit of clauses such as:

a. “Disease Clauses” (i.e. those which can be triggered by the occurrence of severe acute respiratory syndrome coronavirus 2 (“COVID-19”), typically within a specified distance of the insured’s premises);

b. “Prevention of Access Clauses” (i.e. those triggered by public authority intervention preventing access to, or use of, premises as a result of COVID-19); and

c. “Hybrid Clauses” (i.e. those clauses which contain wording from both Disease and Prevention of Access Clauses).

The Court clarified the interpretation of these clauses in favour of the policy holders, together with a plaintiff friendly judgement regarding the extent to which ‘Trends Clauses’ can be applied by insurance companies to mitigate the loss payable out. Trend Clauses could be used by the insurers to argue that the amount of the loss recoverable would have trended down because of the general economic impact of the Covid situation, reducing the out payment to the claimants.

In Ireland’s Commercial Court, Mr Justice McDonald is due on February 5th to give his judgement on the test case, ABERKEN T/A SINNOTTS -V- FBD INSURANCE PLC 2020/3658, involving FBD Insurance and a number of pubs. Judgement was due on the 15th January however this was delayed to allow the parties’ lawyers to make further legal submissions to the court arising out of the landmark UK Supreme Court decision which followed an appeal by the UK Financial Conduct Authority. It is anticipated that Mr Justice McDonald’s decision will bring clarity for a significant number of policyholders impacted in Ireland, and if the Irish judgement echoes that of the UK Supreme Court, will allow impacted businesses together with their legal team and their loss assessors, to press ahead to recover the sums due to them.

However, the devil is in the detail, and if the Irish judgement veers away from the UK approach, it is likely that UK based insurers will seek the cover of differing jurisdictions to try to avoid paying out to Irish policy holders.