Insurance companies and business loss – an update

Ruling paves the way for claims on business insurance policies in Ireland

Following the recent High Court cases concerning the closure of pubs in Dublin and Meath, the High Court has ruled that FBD insurance must pay out on its policy for business loss related to Covid-19 mandated closures.

FBD had unsuccessfully argued a number of grounds to refuse the pay out on the insurance including a commercially narrow interpretation of the relevant clause in their insurance contracts. they argued that a specific event within twenty five kilometres causing the closure of the business in question was to be considered differently to a national pandemic event, some of which occurred within the twenty five kilometres. They had further argued that it was not “normal” insurance practice to cover pandemics and that specialist insurance companies were in place to cover pandemic related matters. Both of these arguments failed before the High Court. The Court ruled that essentially the fact that the pandemic was a national event was irrelevant. If any of the events resulting in closure happened within the twenty five kilometres of the business premises then the relevant terms of the policy were activated and the claim must be honoured.

The secondary impact of this ruling now must be the consequent effect of claims for arrears of rent by Landlords. There is no legislation dealing with the business closures mandated by the Government in its attempts to prevent the spread of Covid-19. In the majority of commercial leases in Ireland, and notwithstanding the absence of any guidance from Government, the majority of Landlords have taken the practical approach to waive or reduce any claims for rent during the periods of closure. The strict terms of written leases give rights to Landlord’s to terminate leases in the event of default. Covid-19 related closures are no exception to “default” for non payment of rent. If any rent waiver’s or reductions are not properly recorded on in fact agreed, legally the capacity exists for Landlords to pursue either enforcement for arrears or termination of the lease.

The secondary outcome therefore of the recent High Court case is the possibility of claims by Landlords against tenants for arrears of rent where specific reductions or waivers have not been agreed in writing. This may complicate matters for any tenant business claiming for loss on the policies. Nonetheless the outcome of the case is an important turning point for business closed as a result of the spread of the Covid-19 virus in Ireland.  Businesses who feel they qualify for cover should now demand that their claim be processed within a finite timeline e.g. seven days failing which their options for regulatory enforcement or indeed litigation should be considered.

At M.P. Moloney we have a track record of dealing with commercial lease issues going back over twenty five years. We have acted for all types of business large and small and particularly in commercial leases in Dublin and around Ireland. If you or your business are experiencing issues with insurance claims or negotiating with Landlords or tenants, contact us today and we will be happy to help. We offer an initial no-obligation consultation.

Martin Moloney