Last week, the High Court threw a significant lifeline to businesses, and in particular pubs, hotels and restaurants, which have been affected by the requirement to close or partially close during the Covid lockdown and whose businesses have been devastated. There is no doubt but that the hospitality sector has been the sector most affected by the Covid lockdown.
Many of the pubs, hotels and restaurants had business interruption insurance in place and, not unreasonably, expected the insurers to honour the policies rather than attempt to use very technical language to avoid their responsibilities. It would seem, anecdotally, that the insurers covered about 10% of claims. The insurers refused to indemnify the remaining claimants.
In the recent case against FBD, the High Court has given clear indication that the insurance policies should cover losses incurred by businesses forced to close, even in a pandemic. It did so in the knowledge that it would apply against other insurance companies as well and potentially have broader applications.
Pubs, hotels, restaurants and other businesses across the county were informed by their insurers that the losses sustained by them as a result of Covid were not covered by their Business Interruption Policies. The Courts have decided otherwise. The insurance companies tried to rely on overly technical and legalistic interpretation of the policies (drafted by them), but the Courts took a more common sense approach to the terms in the policy.
The advantage of having the benefit of this court decision enables policy holders across the county to renew or reinstate their claims under their policies with the insurers, and if they don’t honour the claims, they can consider instituting Proceedings or lodge complaints with the Financial Ombudsman’s Office (or the Central Bank) as the Courts and Ombudsman’s Office will apply the interpretation endorsed by the High Court in the FBD case. Claimants should not have to take the risk of Court Proceedings and should be able to rely on the Ombudsman’s Office to ensure that the insurance companies honour their obligations, where appropriate.
In lots of instances, policy holders should be entitled to be indemnified against losses from the dates upon which the Government ordered the closure, or partial closure, of their businesses. This would be important for restaurants that remained open but could only provide a partial service e.g. takeaway service only.
Before this case, the question was: am I indemnified? Now, for many in the hospitality sector, the question is rather: how do I calculate my losses?
Another consideration that businesses will have to take into account (as I am sure the Revenue Commissioners will) is whether or not any settlement payment is taxable. The likelihood is there will be another dispute down the line as to how the Revenue Commissioners treat the proceeds of a claim under Business Interruption Policy.