High Court delivers landmark judgment in business interruption test cases

The High Court ruled on 5 February 2021 that FBD’s publican policy does cover business interruption losses arising as a result of forced closures due to the outbreak of Covid-19.

G J Moloney LLP issued the proceedings on behalf of the Lemon & Duke pub in Dublin following FBD’s refusal to cover the pub under its business interruption policy. The policy concerned states that cover will be provided in the event of a forced closure where there is an outbreak of contagious or infectious disease on the premises or within 25 miles.

There are in the region of a thousand other publicans in Ireland who have similar cover in place for their businesses and who have also been refused cover by their insurers. It has been an extremely distressing time for policyholders, who are faced with ongoing overheads and have no cash flow. In addition to this, publicans do not know when they will be allowed to re-open and what restrictions will be imposed upon them when they do re-open.

The proceedings were issued following FBD’s confirmation that it would not be indemnifying the Lemon & Duke bar for business interruption insurance, despite the fact that the policy was specifically taken out to cover this very circumstance.

The proceedings, along with three other sets of proceedings, were accepted into the Commercial List of the High Court to act as ‘test’ cases in that the Court would determine the correct interpretation of FBD’s policy.

The Commercial Court held that the relevant ‘insured peril’ under FBD’s policy is the imposed closure following outbreaks of infectious or contagious disease (in this case Covid-19) on or within 25 miles of the premises.

The Court also rejected that the ‘trends and circumstances’ clause in the FBD policy meant that losses sustained by the policyholders in the days immediately prior to the imposed closure in March 2020 could be considered to constitute a trend which is to be applied for the duration of the insured peril.