Four publicans recently won a High Court case in claims against their insurer arising from the Covid 19 pandemic and the losses arising from the closing of the pubs.
This is a significant decision, not just for the publicans but for FBD (and its shareholders) who insure a further 1,300 publicans. Other insurance companies will be concerned about this decision, too.
Let’s take a look at some valuable lessons we can take from this case, shall we.
Firstly, FBD argued that because the enforced closure was as a consequence of Covid 19 cases arising outside the 25-mile limit set out in the insurance policy it was not required to pay out. The High Court did not accept this argument as it was accepted by all parties that there were also outbreaks within the 25-mile limit in the policy terms.
Secondly, FBD argued that the Covid 19 pandemic was not an ‘event’ per se but a series of events or happenings. The insurance policy only covered an ‘event’. This argument was not accepted by the High Court as it held that an event could be a ‘state of affairs’, such as a pandemic.
Thirdly, the High Court was obliged to take a close look at proximate cause and the ‘but for’ test. This test holds that the policy in question only covered losses which would not have arisen ‘but for’ the pandemic and other causes, such as the decision of the government to impose regulations concerning social distancing, forced closures, etc. would not be covered.
The High Court decided that an overly technical interpretation of the ‘but for’ test could lead to a manifest injustice. It held that there may be overlapping causes of the losses and the publicans should not be disentitled from recovering on the policy because there was more than one cause, some of which were not covered by the insurance policy-for example, the alteration of societal behaviour as a consequence of decisions by government.
Fourthly, the High Court held that the publicans cannot maintain a claim for losses arising from the continuing effects of the pandemic when they are permitted to reopen unless they can show the losses arise as a consequence of the imposed closure.
Obviously, FBD and other insurers will be hoping there is a good recovery for publicans when they are permitted to reopen.
The amount of the losses suffered by the publicans will be measured at a later date but the ongoing effects of the pandemic will not be considered.
It is to be expected that insurance companies will be taking a closer look at the wording of their policies in the future to deal with the business interruption cover that is being provided.
FBD has confirmed it does not intend to appeal the decision.
Nevertheless, it appears there will inevitably further claims from other publicans, both against FBD and other insurers.
The fifth lesson we can take from this decision is that all of these cases will be dealt with on their own merits, especially having regard to the wording and terms/conditions of each policy which will almost certainly vary from one company to the next. It does not necessarily follow that every publican will succeed in a similar claim.