With many policy disputes dealt with behind the closed doors of arbitration and a dearth of judicial guidance on coverage in Ireland, the FBD decision handed down by Mr Justice MacDonald in the Commercial Court on 5 February 2021 provided not only guidance on the position under Irish law in relation to business interruption cover but also the Irish approach in relation to policy interpretation generally.
There is no Irish equivalent to the Financial Markets Test Case Scheme and the case did not arise from a referral by the regulator, the Central Bank of Ireland (“CBI”). Rather the case decided ‘live’ claims for indemnity made under business interruption policies issued to FBD by four separate public houses in Ireland following the closure by the Irish government of pubs in March 2020. It is noteworthy however that while the FBD case was not a ‘test case’ per se, presumably pursuant to the CBI’s COVID-19 and Business Interruption Insurance Supervisory Framework, we understand from the judgment that FBD agreed to pay the Plaintiffs’ party- party costs (although we understand that since the judgment was handed down, the level at which those costs are payable is disputed).
Unlike in the FCA proceedings, the Court was asked to consider one policy wording only, however the judgment provides guidance which is likely to be applied in the treatment of business interruption policies generally. While MacDonald J’s judgment was initially written prior to the delivery of the judgment by the UK Supreme Court in the FCA case, the Irish decision was not handed down until that decision had been duly considered and submissions had been considered. While the FCA decision was largely adhered to, it has not been followed in its entirety. Indeed Mr Justice MacDonald specifically confirmed in his judgment that his decision was not reached solely on the basis of the approach taken in the proceedings in the UK.
Aftermath of the decision
This Irish decision is likely to have far reaching consequences for FBD who we understand wrote 1,300 policies. From a wider industry perspective, we understand from a flurry of reports in the Irish media over the past few days that a wave of further claims is anticipated. FBD and other insurers will inevitably argue that the Commercial Court’s decision should be limited in its application to the specific policy wording which was considered by the Court.
When the matter came before the Court on 17 February, FBD indicated that they did not intend to appeal the Court’s decision. Quantum remains to be considered by the Court although we understand that the parties are in discussions to try to resolve this.
The case has generated considerable political interest and led to a heated debate in the Irish parliament with one opposition TD calling for “intrusive supervision of claims handling” by the CBI and describing business interruption as becoming “the tracker mortgage scandal of the insurance industry”.
Following the decision, the CBI issued a press release on 17 February 2021 confirming that it is continuing with its examination of business interruption insurance issues, in line with its Supervisory Framework which was issued in August 2020, and stressing that a “customer first” approach was required. In its press release the CBI indicated that it had contacted insurers “to reaffirm its expectations in relation to insurers’ fair treatment of customers, setting out our expectation that firms to take a proactive and speedy approach in communicating with affected customers and resolving relevant claims”.
The CBI reiterated their guidance that insurers should:
- Honour valid claims and pay them promptly;
- Where there is doubt about the meaning of a term, the interpretation most favourable to the customer should prevail;
- Where legal action results in an outcome that has a beneficial impact for similar customers, firms are required to take swift action to ensure those customers benefit from the final outcome; and
- That they make interim payments to policyholders who make or have made claims pending the final determination of the sums due. The Central Bank is actively monitoring firms’ progress in the resolution of such claims.
The CBI further warned that “while there are further decisions before the courts in relation to the quantum of payments, we do not see any reason for any firm to delay matters any further for customers in advance of those hearings.”
