Irish pubs 'cheers' to win against insurer in COVID case
Ireland's High Court is the latest European court to rule that policyholders' pandemic losses are covered by insurance policies.
On February 5, Ireland’s High Court ruled in favor of four publicans (pubs) in a lawsuit again their insurer, FBD Insurance, the largest Irish-owned insurance company, for not covering business losses sustained during government-mandated shutdowns to curb the spread of COVID-19.
Pubs in Ireland have been shut down for much of the last ten months and were required to comply with stringent restrictions — particularly establishments that did not serve food. FBD provided insurance to hundreds of pubs in Ireland through 1,300 different iterations of the same policy at issue.
At the onset of the pandemic in February 2020, the policy at issue was thought to provide the most substantial coverage, with some pub owners switching over to this FBD policy, believing the policy would better cover them. After the government closed pubs and all other nonessential businesses, many pub owners relied on the insurance policy to seek payment.
FBD refused to pay out and argued that the policy did not provide coverage for the pandemic and resultant losses. Under the terms of the policies, FBD contracted to cover losses arising out of the imposed closure of premises by the government under certain scenarios. One such scenario was listed under extension (1)(d) as “outbreaks of contagious or infectious diseases on the premises or within 25 miles of same.” Judge Denis McDonald rejected this argument, saying that the pubs may be indemnified for losses beyond the period of imposed closure until those losses cease or the indemnity period ends.
FBD then argued that a strict “but for” causation test applied, meaning that plaintiffs would have to show that the damage would not have occurred but for COVID-19. The court rejected this argument, noting that this strict test would create significant problems for plaintiffs who would have to prove that all of their losses arose but for the pandemic or that a societal reaction to COVID-19 did not cause the losses. The court said that where there are two interrelated events, each capable of causing a loss, both events must be treated as causing the loss to avoid a “manifest injustice” in the case. So the court determined that the pandemic was a cause of the plaintiff’s losses, even if societal reactions were also a factor in the loss.
The court held that the FBD policy covered the periods in which the plaintiffs could not trade due to government-mandated closures and that FBD was responsible for paying out for those periods.
FBD stated that it was committed to paying all valid claims and would arrange interim payments while waiting for clarity from the courts. The insurer estimated that the claims would cost around $36 million to payout, which is “well within the range of considered financial outcomes.”
In his 214-page judgment, Justice Denis McDonald said that he was “struck, quite forcefully” when he realized that people who take out insurance may never truly know what they are signing up for.
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