Publicans in FBD case covered for partial closure, court rules

A High Court judge has ruled that insurance policies taken out by four publicans with FBD cover losses resulting from partial closure, as well as full closure, of the bars arising from Covid-19 restrictions.

Mr Justice Denis McDonald also ruled on Friday the four publicans were entitled to the legal costs of their significant test actions over FBD’s failure to pay out on Covid-19 business disruption claims but were not entitled to those costs on the highest scale, the solicitor-client scale.

His judgment on Friday on costs and other issues arose from his main judgment last February in favour of the publicans’ test cases.

Three of the test actions were taken by Dublin bars: Aberken, trading as Sinnotts Bar; Hyper Trust Ltd, trading as The Leopardstown Inn; and Inn on Hibernian Way Ltd, trading as Lemon & Duke.

The fourth action was taken by Leinster Overview Concepts Ltd the owner of Sean's Bar, based in Athlone, Co Westmeath.

In his main judgment in February, affecting claims by some 1,000 Irish pubs and restaurants, the judge found that a policy sold by FBD covered losses pubs sustained by having to close due to the pandemic.

The amount of the losses will be decided on a later date.

Following that judgment, the publicans asked the court for an order compelling FBD to pay their costs on an enhanced solicitor-client basis.

They claimed they had to engage in these actions while FBD had gained the benefit of a decision with very wide implications for the insurer and its clients.

If they were awarded costs on a lower scale, they would be left in a less advantageous position than policyholders who did not take part in the test cases, which was not a fair outcome, they argued.

FBD argued the fact the cases were test actions was not a reason for the court to award costs against it on the enhanced scale.

The plaintiffs’ legal costs

Before the trial, FBD agreed to make a contribution towards the plaintiffs’ legal costs.

It said the courts should only award the highest level of costs in certain scenarios, including when the court is unhappy with the conduct of the case or in exceptional circumstances which did not exist in this case.

The judge said he was not prepared to award costs on the level sought by the publicans. While accepting the cases were important test actions, that was not a basis for costs to be awarded on the highest scale, he said.

The appropriate way to take account of the test nature of the proceedings was to treat that as a relevant circumstance when the publican’s costs are being assessed by a Legal Costs Adjudicator, he said.

If he was wrong on this, and the Central Bank, which has a regulatory role regarding the insurance sector, takes a different view on costs, the court would revisit the issue, he said.

Interpreting ‘closure’

In addition to the costs issue, he addressed matters including the proper interpretation to be applied to the term “closure” within FBD’s Public House Policy of insurance, which is relevant to quantifying the losses.

The publicans argued the correct interpretation of the policy did not require the pubs to be fully closed in order for them to be covered. They claimed the policy indemnifies them during periods when the pubs were partially closed or limited in what trade they could do while various Government restrictions were in place.

FBD argued the language in the policy clearly refers to the period when the plaintiff’s businesses were “completely closed,” and not partially closed, and when certain pubs were carrying on some trade on their premises.

The judge ruled the word closure is not confined to a total shutdown of the insured properties premises, but extends to a closure of part of the premises.

In his February judgment, the judge disagreed with FBD’s interpretation of its business disruption policy regarding Covid-19.

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 actions will return before the court next month.