Insurance firms threatened with legal action after FBD ruling

Twelve insurance companies have been put on notice that they face High Court action from hundreds of restaurants and bars following Friday’s landmark judgment against FBD Insurance.

The High Court ruled that four pub owners are entitled to be compensated by FBD for the disruption their businesses suffered due to the Covid-19 pandemic. The outcome affects claims made by about 1,100 pubs and restaurants.

Following the ruling, solicitors acting for the Restaurants Association of Ireland (RAI) wrote to insurance companies on behalf of 423 businesses seeking confirmation of indemnity and interim business interruption payments.

The 12 insurance companies are: FBD, Hiscox Ireland, QBE Insurance Group, Specialist Underwriting Services, Allianz Ireland, Nationwide Broker Services, Contessa, Aviva, RSA Insurance, Citynet Insurance Brokers, AIG, and Lloyd’s Insurances.

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RAI chief executive Adrian Cummins said the group's legal advisors had reviewed hundreds of policies on behalf of its members.

“We have issued correspondence to 12 insurance companies on behalf of 423 companies giving them seven days notice to make interim payments or we will be going to the High Court for injunctive relief for our members who are initiating proceedings against them,” he said.

“We have analysed about 600 policies and about two-thirds of those have, we believe, legitimate claims for businesses interruption.”

In the High Court decision, Mr Justice Denis McDonald found that a policy sold by FBD covered losses the pubs sustained by having to close due to the global health emergency.

‘Valid’ claims

In a lengthy and detailed judgment delivered on Friday, the judge disagreed with FBD’s interpretation of its policy.

He said cover is not lost where the closure is prompted by nationwide outbreaks of disease provided there is an outbreak within the 25-mile radius and that outbreak is one of the causes of the closure. The issue of quantifying the losses, the judge said, will be dealt with at a later date.

FBD said afterwards it would make interim payments on “valid” business interruption claims under its pubs policy.

The final cost for FBD may top €60 million, double what the insurer has set aside, according to analysts. However, the ultimate cost, including that borne by reinsurance companies that have taken on some of the risk, will be much higher. FBD has said it will not appeal the decision.