Court to rule on FBD’s pandemic business interruption compensation bill

An estimated 1,000 pubs and restaurants are anxiously awaiting a key High Court decision on the sums insurer FBD must pay to four pubs which won test cases over compensation for business interruption due to the Covid-19 pandemic.

Mr Justice Denis McDonald indicated on December 21st that he will give judgment in January concerning the compensation amounts.

The compensation hearing ran for a total two weeks after the judge’s earlier decision of February 2021 that the businesses were entitled to be compensated under their policies for the disruption caused by Covid-19 restrictions.

In its half-year results last August, FBD said it expected the cost of claims arising from the case to be €183 million, €33 million higher than its previous estimate. The insurer attributed the increase mainly to higher legal costs and a reassessment of the estimated amounts to be paid.

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FBD said, once the High Court judgment on quantum is delivered, it will make claims settlements as expediently as possible.

Interim settlements of €20 million had already been paid, it added.

A core issue in the quantum judgment will be the extent of FBD’s liability to compensate for partial closure, when pubs were open but with restrictions.

That involves the court deciding issues including whether the obligations to close bar counters, and to close earlier than normal, constituted partial closure.

Other issues relate to staff-retention costs and the extent of the obligations of pub businesses to mitigate their losses in that regard.

The pubs and FBD have also clashed over whether they are entitled to compensation for certain capital expenditure, including construction of outdoor drinking areas, and to damages over the late payment of insurance cover.

Test actions

The test actions are by three Dublin bars – Aberken, trading as Sinnott's Bar; Hyper Trust Ltd, trading as The Leopardstown Inn; and Inn on Hibernian Way Ltd, trading as Lemon & Duke. Leinster Overview Concepts Ltd, owner of Sean's Bar, based in Athlone, Co Westmeath, is the fourth plaintiff.

In February 2020, Mr Justice McDonald found a policy sold by FBD covered losses that pubs sustained by having to close due to the pandemic.

He ruled insurance cover is not lost where a closure is prompted by nationwide outbreaks of disease provided there is an outbreak within a 25-mile radius of the pub premises and the outbreak is one of the causes of the closure.

In a subsequent judgment with implications for the amount of compensation, he ruled on the correct interpretation of the term “closure” within FBD’s Public House Policy of insurance. He found “closure” is not confined to a total shutdown of the insured premises and includes closure of part of the premises. He considered a premises was closed if seated customers could only be served outside and if a pub was only permitted to operate a takeaway service.

However, the judge rejected arguments by the plaintiffs that the cover was for the shutdown of the business as opposed to the physical premises.

The judge said he would not make conclusive findings on such matters until he had heard evidence in the quantum hearing concerning the exact scope of the closures in relation to all four plaintiff pubs.