High Court rules that FBD Insurance must cover costs to publicans of early closures and closed off areas

A recent High Court decision by Justice Denis McDonald, ordered FBD Insurance plc (“FBD”) to indemnify publicans for losses suffered as a result of business interruptions caused by early closure restrictions imposed by the Government due to the Covid-19 pandemic.

The High Court decision concerning the scope of insurer FBD’s Covid-19 business interruption policy, is expected to increase the compensation sums payable by FBD to affected pubs and restaurants.

In the test cases brought by four bars, three in Dublin and one in Athlone, Justice McDonald previously found that the FBD policy in question extended to closures and partial closures which came as a result of government restrictions due to Covid 19. In his recent judgement Justice McDonald found that “partial” closure included earlier closing hours and the closure of bar counters. Justice McDonald also found that FBD has a liability for some payments made by the bars in question, concerning staff.

FBD in their defence argued that bar counters could not be deemed closed when they could be used for preparing drinks, while the Plaintiffs argued that the bar counter is central to the Irish pub. The court rejected FBD’s submission stating that FBD was confusing the concepts of use and closure. The court suggested that if any person visiting a pub was asked whether the counters were open, the answer would clearly have been “no.” Justice McDonald noted the government guidelines had from June 2020 restricted the customers use of bar counters and he agreed the counter is an “intrinsic part” of an Irish pub.

Justice McDonald found Sean’s Bar (a wet pub, i.e. serves drinks only) was entitled to be indemnified by FBD for closures for the periods between 15 March 2020 and 21 September 2020, and from 7 October 2020 to June 2021. The court noted that this was relevant to Sean’s Bar only and not wet pubs in general

Justice McDonald held that the three Dublin pubs were entitled to be indemnified for losses suffered from 10 August 2020, as a consequence of early closing requirements put in place from time to time from that date and that they be indemnified for some losses suffered as a result of the closure of bar counters during those periods

In terms of quantifying the losses from closure/partial closures, the court found that closure losses could be assessed by cross referencing the hours lost in 2020 and hourly till receipts for equivalent periods in 2019.

Assessing losses from the closed bar counters (ie partial closures) was far more challenging and complex for the court given the lack of segregated records for bar counter sales and all other sales in the particular establishment, such as table service and take away. Given all the variables, such as time of year and busy periods, the experts struggled to agree on the proper way to calculate losses from bar counter closures only but it was held that the court was required to do its best to assess the losses despite the lack of clear cut evidence.

Using a methodology, estimating the capacity of a given bar counter area, the court sought to measure the loss from the closed bar counters. It was held that the bar counter covered a depth of four people away from the counter, although this would not apply in all cases and would be based on the individual pub’s layout.

The court also looked at the use of drinks receipts to get an estimate of drink sales per customer, then multiplying the expected numbers at the bar counter area for the given pub by the drink sales per customer figure.

Given the complexity of quantifying certain losses, the court welcomed from both sides any further refinement to the suggested methods.

In summary, it was held that the pubs were covered by FBD for the requirement to close and cease trading under government restrictions. The Judge asked the parties to engage with one another before the matter is to be heard again, on 17 February 2022, and attempt to come to a mutual agreement for any of the outstanding matters that had not yet been heard by the Court. This ruling will have implications on thousands of restaurants and bars.

About the author: Ciarán Leavy, Head of Commercial Litigation