Radioactivity, sonic bangs, war, terrorism, and cyber risks are just some of the catastrophes FBD Insurance won’t indemnify if you are running a pub and looking for cover. It couldn’t be more clear. The words appear with a red cross beside them under the heading ‘What is not insured?’ on the firm’s insurance policy information document.

On the other side of the page accompanied by a series of green ticks is a summary of what insurance is offered by FBD to publicans, from losing a liquor license to business interruption protection for “disease/murder/suicide”. 

The FBD insurance offering for publicans has remained largely unchanged since the 1980s including the “infectious diseases” add-on, classified by the Irish-owned insurer as a freebie extension, a frill if you like.  The relevant section states that FBD will indemnify the insured as a result of the business being affected by

1. Imposed closure of the premises by order of the Local or Government Authority following:

• Murder or suicide on the premises
• Food or drink poisoning on the premises
• Defective sanitary arrangements, vermin or pests on the premises
• Outbreaks of contagious or infectious diseases on the premises or within 25 miles of same.

Arguably over the years, there was scant cause to really dig down into what it all actually meant until last spring when the coronavirus struck and FBD began telling its publican clients that the clause did not cover them for the pandemic following the government’s decision to shut down all the bars on March 15.

This jaw drop moment for pub owners, many of whom have been devastated by Covid-19, resulted in a flurry of lawsuits against the Irish owned insurer beginning last May. 

Since then, every word of the relevant FBD policy documents, including the accompanying information sheet, has been parsed in minute detail by lawyers as they geared up for a courtroom showdown.

Given the importance of the issues and the amount of money at stake, four test cases were urgently singled out for hearing in the commercial division of the High Court. The proceedings began on October 6. Following a direction from the Central Bank last August, FBD agreed to cover the costs of the proceedings.

Of the four actions being heard, three were brought by Dublin bars: Aberken, trading as Sinnotts Bar; Hyper Trust Ltd, trading as The Leopardstown Inn and Inn on Hibernian Way Ltd, trading as Lemon & Duke. The fourth business is Leinster Overview Concepts Ltd, trading as Sean’s Bar in Athlone, Co Westmeath, which is in the Guinness Book of Records for being Ireland’s oldest pub. 

The reason the case is so important is that the outcome will determine the fate of more than 1,100 bars across Ireland that took out the same off-the-shelf insurance pub policy with FBD. A win will pave the way for them to sue or settle with the insurer for a cumulative total of many millions. Losing will consolidate what has been a crushing year for many pubs.

Other claims involving different insurers may also be influenced by the result.

The finish line is of equal consequence to FBD. The insurer says it has set aside €22 million to cover the cost of claims should it lose, and several million more to cover the legal bills.

Due to coronavirus restrictions, the 11-day case was a hybrid hearing with only the judge, witnesses, and a limited number of lawyers permitted in the courtroom while everybody else followed the proceedings virtually using TrialView, a specialist legal software package. Before each witness gave evidence, Justice Denis McDonald told them they could swear on the bible or affirm but if they chose the former they were to hover their hand above the testament rather than touch it. Another feature of court life in a pandemic.

Yesterday the hearing came to an end with the judge reserving his decision until early next year. 

An alleged breach of contract

The issues Justice McDonald has to determine are complex. Both sides worked hard to persuade the court that they were offering the correct construction of the FBD policy. 

Much of the case was taken up with rows about risk, underwriting and the insurance market, the internal dynamics within FBD, and convoluted legal submissions on contractual interpretation, causation, disaggregation of losses, and general semantics, all illustrated with numerous hypothetical insurance scenarios from murder to ESB explosions.

This meant the human story of businesses fighting for their survival in the middle of a pandemic was at times relegated into the background. But not entirely, as the different publican witnesses took the stand to tell their stories and face cross examination. 

The claims made by the pubs against FBD are for breach of contract and misrepresentation. They want the Commercial Court to rule that they are entitled to be indemnified for the ongoing losses they have suffered as a result of business interruption under Covid-19. In the alternative, they want damages. The Lemon & Duke pub is also claiming aggravated damages due to FBD’s alleged conduct in its handling of the case.

In a nutshell, FBD’s defence is that it is a mainstream Irish insurer and the off-the-shelf cover it provides to pubs does not extend to pandemics. It says none of the pubs, bar Lemon & Duke, ever asked for pandemic cover. The insurer called upon the expert testimony of Peter Sreenan, an insurance broker for 32 years, to show how unusual that request was. He said not once in his career had he been asked by a client to get cover for losses resulting from a global pandemic. The court heard such a niche bespoke insurance product would be found in a big market like London but not in Ireland.

The insurer accepts it does indemnify enforced closures that result from outbreaks of infectious diseases but only in limited circumstances. While the insurer initially denied the pubs’ policy claims on the ground that the government’s direction last March to shut the pubs did not amount to a forced closure, it rowed back on that point long before the hearing date arrived.

However, FBD maintained its position that the imposed closure of the pubs was in response to a national situation and was not causatively linked to an outbreak of Covid-19 on the premises or within 25 miles of any individual bar. On this basis, they argued cover wasn’t triggered.

A reasonable person

When day one of the case arrived Michael Cush, senior counsel acting for the three Dublin bars, set out the main issues to be decided  – did the FBD policy cover the closure of the pubs last March; what is the ambit of the cover if it exists; how do you determine the insurable losses suffered by the pubs. Lastly, how would the trends clause in the policy affect the calculations on what losses could be recovered. (Trends clauses often allow an insurer to pay out less under a policy if there are other circumstances that have affected a business’s ability to trade.)

The pubs placed considerable reliance on the recent High Court decision in England in favour of hospitality businesses that were refused business interruption cover by their insurers during the pandemic. It would be referred to countless times by both sides throughout the hearing. The decision, upholding a ruling of the UK Financial Conduct Authority (FCA) against the insurers, is under appeal. 

In respect of the actual policy document, Cush argued that FBD was trying to get the court to read into the premium a pandemic exclusion clause that simply doesn’t exist. He said it was common for insurers to include exclusion clauses to limit their liability and FBD could easily have done the same. But it didn’t and the cover it offered was for infectious disease on a pub’s premises or within 25 miles.

Sharing duties for the plaintiffs was senior counsel Eoin McCullough, acting on behalf of Sean’s Bar. He set out the legal principles the court had to apply in interpreting the FBD insurance contract. He said the court’s task was to establish the intentions of the parties. The court heard this would be primarily achieved by having regard to the plain meaning of the wording of the policy, as understood by a reasonable person, rather than by looking at what the parties might say their subjective intentions were when they signed up to it. Along with the context, the court was told it must also have regard to the purpose of the agreement, which in this case was to provide insurance cover. 

McCullough said if the court found the policy language to be ambiguous – which the publicans say it’s not – then the contra proferentum rule applies. That would mean the judge would have to prefer the meaning that favours the policyholders on the basis that it was FBD, and not the bars, who was responsible for the wording of the contract. Lawyers for FBD added that the contra proferentum rule should only be used by the court as a last resort “tiebreaker”.

McCullough also said that while a judge may apply “commercial common sense” in trying to understand a policy document, this was not intended to allow people to escape from imprudent contracts. This argument was aimed at countering FBD’s business efficacy line of defence that the contract should not be read in a light that assumes it entered into a deal that goes against good sense. 

Had FBD entered into a bad deal? Cush argued that a host of internal FBD communications would show that right through to the middle of March a wide number of staff across the sales and underwriting departments believed the coronavirus was covered by the insurer. But not all of that evidence made it into the case. Lawyers for FBD first argued such evidence was inadmissible. Then on day three of the trial, the insurer withdrew business efficacy from its defence arsenal and the internal emails and messages were no longer as relevant.

Causation and the word “following”

As previously stated, the clause relied on by the bars in their FBD insurance policies states they are indemnified “following” outbreaks of contagious or infectious diseases on the pub premises or within 25 miles.

The court heard lengthy debates over the construction of the word “following”. Is it used in the policy in a purely temporal sense as in “coming after” or is it causative as in “as a result of”? The pubs favour a temporal interpretation arguing that is in line with the coronavirus outbreak predating the government ordered lockdown last March which saw pubs close. FBD favours a causative approach to the word “following”. For underwriting purposes, the insurer says the disease was not the “proximate cause” of the pub’s business being interrupted – it was the closure order.

The reason this dispute is so important is that it goes to the heart of what is actually covered under the policy (known as the insured peril). Whatever way the court interprets it is likely to have a massive impact on what sort of payouts FBD might find itself making.

Under FBD’s narrow interpretation of the policy, cover is strictly confined to consequential losses as a result of the pubs being closed. Lawyers for the insurer put it to the court that if the pubs had remained open, custom would have been poor anyway due to the effects of the pandemic from home working to cancelled sports fixtures and low tourist numbers.

The insurer claims the accounts show that the pubs’ earnings were already falling off a cliff by mid -March due to customers’ fears of being infected by the coronavirus. FBD maintains that most of the losses suffered by the pubs would have happened regardless of whether there was a lockdown which means they don’t count under the policy. 

The pubs argued for a broader “hybrid” reading of the premium which factors in the words “infectious diseases” as part of the insured peril. In their take, the closure of the bars triggered a fairly comprehensive business interruption package covering the impact of the coronavirus. They claim that disaggregating the losses they suffered from lockdown from those caused by the coronavirus would be a tricky business. They say the losses they are contractually covered for are based on gross profits over the past 12 months of normal trading, adjusted by a trends clause that would factor in any special circumstances that might have impacted on trade.

Crucially, lawyers for the pubs say the trends clause can’t be applied to the insured peril itself. If they are right, and infectious diseases such as the coronavirus are found by the court to be part and parcel of the cover offered by FBD, then the insurer can’t use covid as a trend to reduce the value of the claim.

Late in the hearing, FBD’s lawyers argued that there was another “extreme” consequence to the bars’ hybrid interpretation of the policy – if the pubs had continuous cover for closures and covid, they could stay closed while the policy remained live.

The court heard Sean’s Bar in Westmeath had remained shut since the March lockdown notwithstanding the fact it had a linked restaurant and used to do barbecues before the pandemic. Declan McGrath, one of two senior counsel acting for FBD, said it even stayed shut when wet pubs outside of Dublin reopened in the autumn. Under its FBD policy, Sean’s Bar says it is entitled to claim for losses for the entirety of the period of indemnity and not just for the government lockdown. If the pubs were correct in their reading of the cover on offer, why would any insured bar bother to reopen, McGrath asked, when they could stay closed and claim all of the losses.

The evidence begins 

The opening submissions ran late into day four of the trial. It wasn’t until that evening that the first witness in the case was called. Stephen Cooney is director of the Loyola Group which owns the landmark suburban pub, The Leopardstown Inn, fondly referred to by its south Dublin regulars as The Lep Inn. He spent around 40 minutes testifying.

Cooney originally trained as a solicitor but having completed an apprenticeship in McCann Fitzgerald the court was told he changed course career wise and co-founded the hospitality group in 2012 with his friend Brian O’Malley a graduate of UCD and the Smurfit Business School. They were soon joined by Brian’s brother, the former Leinster rugby player Eoin O’Malley when his playing career was cut short by injury. The group’s first venture was The Bath Pub in Sandymount. Soon they were in expansionary mode and the business now controls eight bars in Dublin, Drogheda and the Algarve in Portugal as well as an artisan pizza delivery business called Base Wood Fired Pizza. Loyola employs around 350 people and last year had a net turnover in the region of €23 million.

The Leopardstown Inn has been in the hands of Cooney and co since 2015 when they bought it out of examinership. When the Loyola Group took it over, the pub felt stale to them so they spent half a million euro on refurbishment works to draw in a younger crowd. 

“Isn’t the reality that an awful lot of people were very afraid?”

Remy Farrell, senior counsel for FBD

For those unfamiliar with the Lep Inn, it is vast in size, consisting of five bars (including a revolving carousel bar), a large function room, three smoking areas and a small off-license. An upstairs restaurant was converted into offices by the group.

Another €320,000 was spent on maintenance repairs and a new shop front. The pub hired an experienced marketing manager who forged relationships with local businesses and scored a sponsorship deal with the nearby Leopardstown racecourse.

The court heard annual turnover rose by nearly a third between 2015 and 2019 with EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) more than doubling from €281,000 to €655,000 in the same period.

Pre-Covid, Cooney had grounds to be optimistic about the future of the business. Microsoft had moved into their nearby head office in 2019, and Mastercard was due to follow suit. Also a number of new residential and office developments were earmarked for construction in the area. Unusually for a pub in Ireland, competition in the locale was practically non-existent.

For the first two months of 2020 business was still booming. Revenue in January was up 5.6 per cent year on year. And while February was flat in terms of growth,  the first week of March saw trade jump by 3 per cent on 2019.

But according to Cooney, by March 13 business began to slow down. The Six Nations match with Italy was cancelled and uncertainty over Covid-19 was growing. “On Friday, Saturday and Sunday, we started to see a dip year on year,” he said. From early March, Cooney had been watching footage of the coronavirus taking hold in northern Italy. While the Irish government’s reaction to the pandemic seemed slow to him at the start, he felt it then began to move very fast as the St Patrick’s Day parade was cancelled and the public began to call for the pubs to be shut.

We were hit with a wall of silence in the weeks after the imposed closure when we needed their support the most

Stephen Cooney, co-founder of the Loyola Group

He contends that if the pubs had not been ordered to shut, the south Dublin pub would have done everything possible to trade through the crisis. He said he believed that this could have been done safely as the size of the bar (14,000 square feet) would have allowed for ample room for social distancing. 

Up until 2018, the bar was insured with Aviva through a broker. That changed after Cooney met with Sean Fox of FBD in late 2017. He told the court he liked Fox and he decided to switch policy after he was advised by his broker that the cover on offer from FBD was better.

Falling off a cliff

Under cross examination by barrister Remy Farrell, for FBD, Cooney agreed he was aware at the time he was buying an off-the-shelf insurance policy. While he read the ‘benefits and features’ document rather than the actual policy itself, Cooney said he was aware of the clause relating to infectious diseases. He said it made him think of Sars in Hong Kong, the Foot and Mouth outbreak in 2001 when Six Nations matches were cancelled, and of mad cow disease.

The court heard, before the doors closed last March, Cooney was informed by Fox, his FBD contact, that the Leopardstown Inn had business interruption cover if the pub was ordered to close and that the insurer would look at making an interim payment as early as the following week to cover the costs of paying staff. The Loyola director said he was relieved and very happy to hear this and informed his banks AIB and Ulster Bank that cover for Covid-19 had been confirmed. On March 16, Cooney says he was subsequently informed by Fox that the insurer might be changing its mind. He became increasingly concerned that FBD was reneging on its commitments.  From his calls with Fox, he said it was his understanding that FBD was trying to estimate the cost of having to pay out on all claims. 

Cross examined by Farrell, Cooney denied that business at the bar was “falling off a cliff” by the end of the second week in March last – before the government lockdown. While he did not have the figures in front of him, Cooney said trade was down around 40 per cent on the Friday and Saturday of that week. 

Farrell put it to him there were suggestions downward trends were significantly worse than that. “Isn’t the reality that an awful lot of people were very afraid?” Farrell continued. “Yes,” Cooney agreed. Farrell put it to the Loyola director that if there had not been an enforced closure of pubs by the government, his business would not have been in a position to make an insurance claim. Cooney asked him to repeat the question.

On a second airing, he agreed with Farrell who then added: “You can’t claim for events before the closure”. 

Cooney said locking down the pub the Loyola Group had spent eight years building up came as a massive shock to him and his business partners but they initially trusted in the business interruption cover they had obtained from FBD and were optimistic that any turbulence in their industry might create opportunities going forward. He said that optimism quickly faded.

The court heard the losses suffered by the Group since March 15 have been immense, and will continue long into the future due to vacant offices, an absence of corporate bookings and a reduction in local trade. “There is nothing more off putting for a customer than walking into a sterile and empty pub,” he said. 

The court heard when the Lep Inn reopened in the summer, it took a strict approach to enforcing the government guidelines around social distancing, PPE, contact tracing, food purchases and time limits for customers. So much so that he was told by a customer in the car park one morning that they were losing trade to a rival pub a couple of kilometres away.

“The staff are fed up. Some are considering leaving the hospitality industry,” Cooney said. The court heard that after the pubs reopened wage subsidies were halved. Loan and mortgage breaks were no longer in place. “We really don’t know how much more we can take of it,” he told the court.

He said he maintained a good relationship with Sean Fox who he found to be “excellent” despite his disappointment with FBD. “We were hit with a wall of silence in the weeks after the imposed closure when we needed their support the most. I was shocked and disappointed that nobody from FBD’s head office reached out to us when we contacted them after the closure,” he said in court filings. They felt neither supported nor protected by FBD despite what he described as the insurer’s “aggressive marketing campaign” during lockdown promoting the slogan “Support, it is what we do”. He said he believed this was done to counter the negative publicity surrounding the insurer’s refusal of pubs’ covid claims.

The master of doom

Noel Anderson’s story is a little different. He is the managing director of the Inn on Hibernian Way, the company behind the Lemon & Duke bar off Grafton Street in Dublin city centre. Unlike the other pubs in this legal challenge, Lemon & Duke actively sought coronavirus cover from FBD in late February. Anderson claims he switched insurance providers to FBD directly as a result of representations by its sales staff on indemnifying the bar for a Covid related closure.

Anderson is steeped in the pub trade having worked in it since he was 18 years old. The court heard the Lemon & Duke brand was launched in April 2016 in order to revamp the bar into a New York-style gastrobar. The pub had previously been called the Grafton Lounge, and before that Cocoon.

The four other shareholders are the well known Irish rugby internationals, Jamie Heaslip, Sean O’Brien, Rob Kearney and Dave Kearney. They also own the Bridge 1859 in Ballsbridge, Dublin.

Business thrived after the relaunch, according to Anderson, who is vice-chairman of the Licensed Vintners Association (LVA), the representative organisation for publicans in Dublin. The “bright and spacious bar” appealed to thirty-somethings looking for a morning coffee, a weekend brunch or dinner followed by drinks and dancing. “We hit the ground running,” he said in a statement before the court. Like The Leopardstown Inn, expectations were high for 2020 with European Championship matches scheduled to be played in Dublin in the summer and the rugby November series in the winter. 

But last February, Anderson became increasingly concerned about outbreaks of the coronavirus in other European countries, most notably in Italy. He started preparing a survival plan for Lemon & Duke and the Bridge 1859 factoring in rent freezes, staff lay-offs, interest only payments and health and safety.

“It was the most poignant moment in the history of the LVA and we knew the gravity of the situation,

Noel Anderson, Lemon & Duke

He began to voice his concerns to other publicans, and a Guinness rep, about an outbreak hitting Dublin but he suspected they thought he was being the “master of doom” and overreacting. He also thought they probably had a bit of a laugh at him. He also called on the LVA to look at a contingency plan for pubs. The tide began to turn. He recalled Paul Mangan of Devitt’s Bar on Camden Street sending him a screenshot of an article that showed “panic in Tenerife as coronavirus hits hotel in holiday hotspot”. Mangan said his parents had landed on the island the previous evening and weren’t allowed to leave their hotel room, adding “I think you’re right about this thing”.

The Lemon & Duke’s public house insurance policy with Citynet was due to expire on February 28. Anderson’s broker arranged for a new Allianz policy to be put in place for €31,575. But it didn’t include business interruption cover if the government decided to shut down the bars.

Anderson asked his broker if he could get insurance against Covid-19 and was told it was probably a bit late in the day, given the growing prevalence of the disease. Under cross-examination from lawyers for FBD, it was put to Anderson that what he was really asking his broker to find was an available off-the-shelf policy rather than some bespoke insurance product from Lloyds of London. Anderson partly agreed but maintained his position that he was specifically looking for Covid cover.

Anderson became increasingly anxious as he read about and witnessed on television the scenes from northern Italy going into lockdown with empty restaurants and panic buying in the shops. He was informed by Marcus Houlihan, who operates the Long Hall bar, that he believed the wording in the FBD policy covered an outbreak of the disease. 

Anderson informed his broker on February 28 that he was pulling back from the Allianz deal in favour of FBD which was offering annual business interruption cover of up to €2 million including for the coronavirus. His broker thought he was “stone mad” as there was a “million to one shot” that the pubs would be closed. The switch had even left Lemon & Duke exposed insurance-wise for one night but he thought it was worth it for Covid protection.

Earlier that day Anderson had told FBD head of business John Reade that if he were going to take out insurance with FBD he would need a side letter confirming that the pub was indemnified for the virus.

Anderson met with FBD’s business development executive Paul Shanahan the following Monday, March 2 at Lemon & Duke to nail the details. He says he specified exactly what he wanted covered under the policy in the event of a coronavirus closure, from wages to gross profit and rent. 

That evening Shanahan called Anderson offering him a premium of €27,000. The FBD executive said a side letter would follow when the policy went live. He also emailed clarifying that for cover to kick in the pub had to be forcibly shut down, it could not be a voluntary closure. Anderson said he was “extremely happy”. He thought the sleepless nights he had been having were now over. The pub was covered in case of a coronavirus lockdown.

By then two cases of the virus had been confirmed in Ireland, a woman who had travelled to the north from Dublin airport and a school in Dublin that closed for two weeks due to an infected teenager.

The axe falls

Anderson subsequently emailed Shanahan asking for clarification on how business interruption cover would operate if the government forced bars to close. He claims the FBD executive phoned him and told him not to worry, that the detail was being worked out by the claims and underwriting departments. It is a call Shanahan does not recall making.

But as the situation developed, Anderson says he did worry. He rang FBD manager John Reade at 9.43am on Sunday, March 15 expressing his concerns.  He was impressed Reade picked up the phone. As LVA vice-chairman, Anderson was aware that publicans were keeping the bars open because they were not being forced to close but they were scared of an outbreak arriving at their door. A chef in a north Dublin pub that had been packed the previous night had tested positive for the virus. A ‘close the pubs’ movement was beginning to gain popular momentum, particularly on social media where there was outrage over footage of jammed pubs in Temple Bar.

That afternoon the axe fell. Vintners’ bodies the LVA and the VFI were summoned to a meeting at the Department of the Taoiseach. Anderson did not attend. He awaited the outcome across the road from government buildings in the Merrion Hotel. “It was the most poignant moment in the history of the LVA and we knew the gravity of the situation,” he told the court. Under cross examination, he denied that the LVA had primarily met with the government in order to secure a mandated shutdown that would trigger business interruption insurance. Anderson said that was an overreach. “It was discussed but it wasn’t the primary purpose,” the court heard. Anderson said he understood that the first words of the hours-long meeting came from the chair Martin Fraser, secretary general of the Department of the Taoiseach, who said “we’re closing you down”. This position had the strong support of the Chief Medical Officer Tony Holohan.

Afterwards, the government called on all pubs and bars to close until at least March 29.

Anxious to know if Lemon & Duke would get paid by FBD, Anderson spoke with Reade a few times the next day. He said he noticed an alarming change in the executive’s demeanour. He had become “cagey” and allegedly told the publican “you should be ok’ which Anderson found extremely worrying.

On St Patrick’s Day, Anderson attended what he described in court as a “surreal” meeting with FBD executives including the then chief executive Fiona Muldoon on behalf of the LVA. He said Muldoon, who did not give evidence at the trial, informed him that cover would be based on what business a pub would be doing if open during the Covid outbreak as opposed to basing it on the pub’s performance before the virus struck. Anderson believed this did not tally with what he had been sold. Under cross-examination, he agreed that he had not read the policy and wasn’t aware of the trends clause.

Muldoon allegedly argued that this was not a forced closure, which the LVA disputed, and that FBD probably couldn’t afford to pay out and even if they wanted to cover the coronavirus as the underwriters wouldn’t allow it.

According to Anderson, Muldoon was “visibly shook” by his story that he had taken out cover with FBD specifically for coronavirus and that he had a side letter confirming this. He recalled her saying: “Oh, wow, wow this is all news to me”. 

When Muldoon allegedly said that nobody could have seen this coming, he said he replied: “Hold on, I saw it coming and I took out insurance to cover it.”

Anderson said he knew after the meeting, FBD was reneging on its agreement. He rang around his own senior staff to explain they were all going to be on unemployment benefit. “It was one devastating phone call after another,” he said. Staff were paid backdated holiday pay to help them survive.

He submitted a claim for business interruption cover on March 19 but bar an acknowledgement of its receipt, he said he was otherwise stonewalled.

On March 31, Anderson sent a copy of this article in The Currency to John Reade around FBD’s failure to pay out business interruption claims. It noted that FBD had made profits of approximately €110 million in 2019.

By then, following further communications between Muldoon and LVA chief executive Donall O’ Keeffe, it seemed clear that they would soon have a legal battle on their hands. 

Cover is withdrawn

On April 15, Anderson received a letter from Amoss solicitors on behalf of FBD stating that “following the receipt of senior counsel’s opinion the representation that the Business Interruption section of the Policy contains an indemnity in respect of consequential loss arising from the coronavirus epidemic is hereby withdrawn…”

FBD provided three reasons for the move. The first was that the closure of the Lemon & Duke was not caused by outbreaks of disease on or within 25 miles of the premises but from national considerations resulting from a global pandemic including the requirements of social distancing.

Second, the insurer said the relevant sub-clause could not reasonably be interpreted to extend to the scale of a pandemic. It only provided cover for outbreaks of diseases “particular to a locality”. 

The third was that business interruption loss had been caused by widespread public concern regarding the risk of infection, restrictions on gatherings and practices such as social distancing. 

To back up this third assertion at the trial of the action, lawyers for FBD expressly noted the wording of the government’s closure announcement on March 15 which stated: “The LVA and VFI outlined the real difficulty in implementing the published guidelines on social distancing in a public house setting, as pubs are specifically designed to promote social interaction in a situation where alcohol reduces personal inhibitions.”

Anderson says he felt this was “wholly disingenuous and completely dishonourable”.

Around six weeks into the closure, the court heard staff at the pub were struggling. Anderson said he sent one employee, who was having issues with his bank, around €800 or €900 worth of One for All vouchers so he could feed his family.

Personally, Anderson said he has found the experience to be a bit of a nightmare, one of the worst of his life. The financial strain had been immense. He said his family had mostly been kept afloat in respect of mortgages and bills by his wife who managed to stay working. “FBD’s refusal to provide cover has completely consumed me since the middle of March 2020,” the court was told. He thought about it morning, noon and night.

Under cross examination, Anderson accepted that his projections about 2020 being a bumper year would not have come to pass regardless of the pub’s closure with so much sport and live entertainment put out to pasture.

But when counsel suggested that the outlook for the business was bleak prior to its closure on March 15, the publican replied that it was hard to know because it all happened so fast. Senior counsel then referred to the transcript of a television interview Anderson had done while wearing his LVA hat with Matt Cooper for Virgin on March 13. Asked about the impact of the coronavirus Anderson said: “we’re being decimated”.

Farrell put it to him that an expert analysis had shown the pub’s sales had reduced by 29 per cent week-on-week on the Wednesday before lockdown and by 50 per cent on the Thursday. From Friday to Sunday the respective reductions were 80 per cent, 82 per cent and 77 per cent. Anderson said he would need to have those figures looked at in order to comment.

Asked about  the trends and circumstances clause in the FBD policy, Anderson said that nobody had told him in advance that cover would be based on the trade the Lemon & Duke did in the 72 hours before it closed when the country had gone into “shell shock”.

In respect of the representations made by FBD staff, the publican agreed with Farrell that they did not purport to go beyond the terms in the policy. The policy was the policy. Counsel later argued that this showed there had not been any misrepresentation by the insurer.

Plain English

Christopher Kelly, director of the Aberken Group, gave evidence on behalf of Sinnotts Bar, the well-known sports pub opposite the Gaiety Theatre in Dublin 2. 

It employs 32 staff and is one of 11 bars in the Aberken stable, 10 of which are insured by FBD. Kelly, a stalwart of the licensed trade, said since 2006 the group had built up a relationship with the insurer and wanted to stay loyal to a blue chip Irish company despite offers of cheaper premiums elsewhere. He had found FBD to be fair and straight dealing when handling third party claims. Over the past 15 years, he estimated the Aberken Group had spent around €3.5 million in policies with FBD. 

His renewal for Sinnotts in 2019 cost €49,875 for a 24 month indemnity period. The maximum cover offered was over €3 million. He said the disease clause was important because after 30 years in business, he had seen the impact of mad cow disease, foot and mouth and swine flu on tourism.

As a longstanding customer Kelly said he was disappointed with FBD’s declinature of his covid closure claim on April 15. He had registered business interruption claims for all ten pubs on March 24 by email. 

Like with everybody on the Covid payments, they just don’t want to work, they’re getting 300 quid a week and it’s just nearly impossible

Philip Byrne, Sean’s Bar

He noted that in July when he came to renew the insurance for another of his pubs The Black Lion he received a letter from FBD explaining the insurer was introducing communicable disease and Covid-19 exclusions under the consequential loss and business interruption section of the policy. The exclusion was new and was not contained in the earlier policy.

Nobody wants to be here, Byrne told the court at one point. “But we believe from reading the simple terms of the policy, because that’s all I can do, plain English as a businessman, I’m not a lawyer or a barrister, is that my cover simply says to me is that I’m covered for a disease on the premises or within 25 miles of the premises, triggered by a forced closure. All of the parameters have happened,” he said.

Kelly said he had a number of insurance renewals coming up and as a result of this episode he had lost confidence in what the policies were offering and what he was covered for. He said he had been told by the Central Bank that when a policy was ambiguous it should lean favourably towards the policy holder. “This is not happening,” he said.

Again, in cross-examination FBD’s lawyers focused on whether Sinnotts’ 2020 prospects would have nosedived due to the coronavirus, whether open or shut, by missing out on sport, hen parties, pre-theatre dinners, St Patrick’s Day, and general footfall. Like Anderson and Cooney before him, Kelly said trade was down the second week of March. 

For the year to date, turnover was down 63 per cent.

But Kelly maintained that Sinnotts could have traded through the lockdown nonetheless. Its large size and outdoor space meant it was able to cater for social distancing. While people were initially scared, they had learned to adapt, the court heard. He cited a successful Saturday night pre level 3 restrictions, when there was sport on, where they pulled in €11,000 with around 140 people socially distancing and eating food.

Sean’s Bar remains shut

The fourth publican to give evidence was Philip Byrne who has run Sean’s Bar since 2014. It is the only pub owned by his company Leinster Overview Concepts and in his view it is probably the busiest bar in the whole of Westmeath. Byrne told the court he got into the pub trade while living in America as a young man in the 1990s. 

Sean’s Bar employs around 30 staff, about a third of whom have worked there for a long time. International tourists are part and parcel of the bar’s success. Over the years, it has forged deals with tour companies like CIE, which stop there as a half-way point on the trip from Dublin to the Wild Atlantic Way. Typically trad music is played live every night for a more local crowd. 

The bar, which doesn’t have a restaurant, has remained closed since March 15. 

Prior to that business was good, he said, at least up until Thursday the 12th when new social distancing requirements slashed the number of customers allowed in the pub to about a third of capacity. He said takings for the week were down by about 23 per cent.

For the first few months of lockdown, staff were supported by the emergency Covid wage subsidy scheme and the bar secured an accommodation on its mortgage payments. But the court heard the mortgage break is over and monthly payments of €11,000 began again at the beginning of October.

Asked by his barrister Eoin McCullough how he saw the future if things continued this way, Byrne replied that he wasn’t sure. “Like, we probably have maybe three months’ mortgage payments we could keep going. I don’t know about keeping paying the staff, we’re doing that up until last week, we’ll do it this week, but just not sure, you know,” he told the court.

He said the bars and hotels in Athlone were very busy over the summer with domestic tourism but Sean’s Bar could not reopen as it didn’t have a restaurant license. Asked why he didn’t partner with the adjoining Portside restaurant (the building is owned by the pub) to restart the business, he said it didn’t feel safe or profitable as the bar doesn’t even have an auxiliary kitchen.

Our policy provides for business interruption in relation to notifiable diseases which we list individually below. Coronavirus/Covid-19 is not included in the list of notifiable diseases..

FBD internal email

The court heard when restrictions on wet pubs eased in September, his plans to reopen were stalled because it was impossible to get staff. “Like with everybody on the Covid payments, they just don’t want to work, they’re getting 300 quid a week and it’s just nearly impossible. Any of our guys that we had are quite happy to stay in college and get their €300 and they don’t want to be doing 20 hours for me for €200.” When he surmounted that difficulty, new restrictions had come back into force. Under cross examination barrister Remy Farrell suggested to him that other bars seemed to have managed.

Byrne told the court that he had carried out extensive renovations to the bar during lockdown including refurbishing the toilets, the outside decking and the cobbled beer garden. However, he denied the suggestion from FBD’s lawyers that he had seen the closure as an opportunity to get through a “wish list” of work. He said the job was done in preparation for reopening with social distancing requirements.

The court heard Sean’s Bar had secured its FBD insurance policy through a broker last year. It was renewed on March 23, after the bars had all been closed. Byrne said he did not ask his broker about Covid protection arising from the shutdown.

Under cross examination, Byrne denied plucking figures from the air in respect of the breakdown of trade at Sean’s Bar. When lawyers for FBD noted that Byrne had not handed over the bar’s daily turnover figures in the run up to March 15 to their financial expert, the publican accepted he didn’t want them to be seen by the insurer’s witness.

When it was put to him that business would have been down due to the coronavirus if he had reopened the pub on June 29, he replied that he didn’t know. “It could’ve been dead, it could’ve been a bonanza,” he said.

FBD takes the stand

Then it was the turn of the insurer to call evidence. Only two FBD witnesses testified. On day six of the hearing, the first, FBD Business Development Executive Paul Shanahan told the court that in late February the co-owner of the Lemon & Duke pub Noel Anderson got in contact with the insurer looking for a quote on cover for contagious or infectious diseases. 

He made some enquiries and came away from a phone call with his line manager John Reade believing that the provisions in FBD’s Public House Multiperil Insurance Policy would cover the coronavirus. He added that this was not run past the insurer’s underwriting department.

Separately he was told in passing at work that cover for Covid-19 only kicked in where a local authority or government ordered the pubs to close because of an outbreak.

Shanahan referred to the meeting he had with Anderson on March 2 at the Lemon & Duke pub to discuss the bar switching its insurance policy to FBD. When the conversation turned to Covid-19 and how cover would work in the event of the bar being closed, he recalled Anderson telling him that the fact FBD had coronavirus covered was in its favour when it came to deciding on a policy.

After the meeting, Shanahan set about getting Lemon & Duke a quote for the policy. The court heard that Shanahan and a colleague David Ryan, an FBD sales inspector, discussed how having covid cover was an additional sales pitch. 

The premium quote agreed for Lemon & Duke was €27,000. The deal was done on the same day.

On March 6, at another meeting between FBD and the Lemon & Duke, Covid-19 again raised its head as the night before they had all seen another FBD client, Olivier Meissonnave of Dax restaurant, appear on RTE’s Prime Time to discuss the cancellation of the Ireland v Italy rugby match in Dublin and the effect this would have on the restaurant. The assumption remained in that conversation that FBD would offer cover but Shanahan wasn’t in a position to provide specific details.

Five days later, when Anderson sought confirmation on how business interruption cover would kick in, Shanahan says he advised that it was still under discussion with FBD’s claims and underwriting departments. By then, there had been Covid cases in Trinity College Dublin, the Mater hospital, and at a school in Glasnevin.  

On the same day, Shanahan received an email from his superiors in FBD stating: “We have been receiving a number of queries on business policy cover over recent days, specifically business interruption cover related to coronavirus/Covid-19 outbreaks. It’s important to note that our products have been designed and priced to cover standard foreseeable risks, not those that are extraordinary such as coronavirus/Covid-19.”

The email also stipulated FBD’s position on the ambit of cover for imposed closures.

In his evidence, Shanahan said he continued to have questions as to whether the policy was still offering some elements of cover in relation to infectious and contagious diseases.

Subsequently, a formal claim was submitted by Lemon & Duke which Shanahan forwarded on to the claims department. Around this time he says he was advised by his line manager John Reade not to have any further communication with Anderson because he and the then chief executive Fiona Muldoon had planned to meet with representatives of the Licensed Vintners Association (LVA) on March 17. The court heard that it was only after this meeting that it was clearly outlined to FBD staff, including Shanahan, that there was no cover for Covid-19 in the circumstances that had arisen.

Having realised his error in assuming that business interruption cover due to Covid-19 was part of the policy, he passed this information onto Anderson on April 2. “This caused me great concern and I immediately sought guidance from John Reade as to how to deal with Lemon & Duke and the business interruption claim that had been submitted on his behalf,” he said.

Asked under cross examination by Michael Cush whether his belief about protecting against covid had been common within FBD he replied “no”. He was asked to comment on an internal communication he had sent in late March expressing concern that FBD had mis-sold the policy. He did not resile from the views expressed at that time.

In his witness statement to the court, he said that the last number of months had been a stressful period for him given the external media coverage the case had received. In his long career in insurance, nothing like this had happened to him before, he said. “I am not the type of person that would try to pull the wool over anyone’s eyes, and based on my discussions with Mr Reade and Mr Ryan, I had no reason to think that cover for Covid-19 was not available under the Public House Policy”.

The underwriter

Kate Tobin, FBD’s chief of underwriting, gave evidence via videolink. A qualified actuary, she was the only senior team member of the insurer to testify during the case. She has been on maternity leave since April 3.

The court heard discussions about business interruption cover and the coronavirus began in FBD around late February/early March. She said at the time she thought it would probably be like swine flu, a novel disease from overseas that would lead to a few sporadic cases around the country. 

The infectious disease extension on the policy was not something that came up regularly in discussion, the court heard. But information requests started coming in and staff began to consider FBD’s exposure. A colleague emailed her on March 5 setting out the insurer’s position on the public house policy. It said the premium “covers reduction in turnover due to an imposed closure of the premises by government or local authority following outbreak at the premises or within 25 miles of the premises, i.e. does not cover general reduction in turnover, does not cover imposed closure where outbreak is not on premises or within 25 miles of premises.”

From Tobin’s perspective, the underwriting position was quite clear from the first week of March. The conditions were strict, no cover existed for business interruption to pubs arising from a general nationwide lockdown. She said the conversation moved on to what other supports FBD could offer to customers in a difficult time. Premium refunds were considered on a pro rata basis during the lockdown.

Under cross-examination by Cush, she said she believed then, and still believes, there could be an event where Covid would trigger cover under the policy. By way of example, she said a member of staff in a pub might contract the virus and a closure order would shut the premises while it was being cleaned. She said that was not what was at issue in the cases before the court.

Tobin said by around March 18, FBD became clearer in its communications with customers stating that pandemic cover was not available. The court heard it was a way of managing expectations but in retrospect, she believed the language used was an oversimplification of what FBD was trying to describe. When Cush suggested that this blunt position was still a part of FBD’s defence, she said she was somewhat confused and surprised by that.

Her evidence continued into a second day. Under cross examination, she said she believed Paul Anderson of Lemon & Duke’s reaction to the withdrawal of cover from FBD was justified even if she disagreed with the premise that such cover was available to him in the market at the time. “I think it’s unfortunate that it wasn’t made clearer to him, the circumstances under which his policy would cover coronavirus and it’s also unfortunate that he hadn’t, I suppose, been made fully aware of the detail of the terms and conditions of his policy,” she said.

It was put to her by Cush that based on the representation made to him by FBD, Anderson was perfectly entitled to believe he was covered and that it was unconscionable for FBD to withdraw it for no specified reason. “I suppose,” she answered. “I don’t know why it was done. I mean, if it’s characterised in the way you’ve laid it out, it seems like, I suppose, not a great thing to have done.”

Cush: Was it unfair? 

Tobin: Somewhat. 

Cush: Only somewhat? 

Tobin: Yes. 

Cush: Is that yes, you’re still saying only somewhat? 

Tobin: No. Yes, it was unfair. It would seem to me unfair.

With that her evidence concluded.

The rest of the case was made up of various experts, called by the pubs and FBD. 

Tom O’Brien, an expert in corporate restructuring and Head of Financial Advisory Services at Mazars gave evidence for FBD. It was his view that the restrictions imposed, health concerns and the widespread closure of businesses would have had a significantly negative impact on the pub trade if bars had remained open. It was a fourfold hit in respect of demand, capacity, health and safety, and ongoing additional costs, he said.

According to his financial projections, based on the figures he had received, one worst case scenario would have seen food and drink sales drop by as much as 75 per cent.

UK insurance expert, Christopher Hills briefly gave evidence about the bespoke nature of specialised products like pandemic cover and how it would not be part of an off-the-shelf mainstream policy offering.

Alan Grace, an underwriting expert called on behalf of the pubs, described how insurers typically undertake review processes that allow them to respond and manage new risks from terrorism to Y2K. He said he found it surprising that FBD’s publican policy (which he thought was of a high quality) had remained much the same for decades. In his opinion, there were also signs – such as the lack of a monetary limit on the sum insured – that it had not been reviewed in some time.

Lastly, Mark Lewis, a forensic accountant called by FBD, provided a report calculating the value of the pubs’ business interruption losses between March and the end of June. The court heard he measured the losses in accordance with the pubs’ claims based on their trade at different points. For The Leopardstown Inn, he deducted wage and fixed cost savings of €563,865 from the lost gross profit to arrive at a net loss figure of €84,852 which he adjusted down to just €60,899 for the purposes of an insurance claim.

For Sean’s Bar, he found the assessed loss would be in the region of €308,000. Under cross examination, it was put to him that his report applied trade fall-offs experienced by the bars from the coronavirus over a short period of time to a much longer period of time. Lewis maintained that the calculations were reflective of the lockdown period.

The case winds down

It took four days to open the case and another four at the end for the different parties to sum up their different positions to the court.

James Doherty, acting with Cush for Sinnotts and The Leopardstown Inn, went first. He pointed out, in his submissions, FBD’s alleged obligation to construct its policies in light of the EU (Insurance Distribution) Regulations which were introduced in 2018 to protect consumers. The regulations stipulate that the information document included in an insurance product must be: “accurate and not misleading”, include a summary of the cover provided and a “summary of the excluded risks”. It is part of the pubs’ case that it would have been easy for FBD to have added an exclusion clause in respect of pandemics.

Eoin McCullough, for Sean’s Bar, highlighted what he claims is the incoherence of FBD’s position. He took the example of a closure due to a food poisoning outbreak where everyone falls ill and they don’t pay for their food. The next day the local authority imposes a closure. He said it is FBD’s case that the restaurant would get minimal cover under the policy on the basis that customers weren’t going to come now anyway.

He said anyone taking out this policy would be extremely surprised to find out that it actually offered no indemnity but that, he said, was the practical consequences of FBD’s case.

In his submissions, Declan McGrath for FBD, revisited one of the insurer’s central defence claims, that it doesn’t offer specialised pandemic insurance, the type you would get from Lloyds of London. He noted that the pubs’ own underwriting expert Alan Grace had agreed under examination that pandemic cover was available in the London market and he said that meant it was “reasonably available” to the plaintiff pubs if they had wanted it. But it was not what FBD was offering, he said. The Irish insurer’s policy extension on infectious diseases was aimed solely at localised outbreaks, “events” within specified territorial limits. He argued that under the policy there had to be a causative connection between the outbreak and the closure for cover to kick in. The loose temporal link argued for by the pubs in their interpretation of the word “following” was too vague. Would the policy payout on a closure following an event a year ago?

Late Friday afternoon, the closing speeches came to an end. Justice Denis McDonald thanked the lawyers for the quality of their submissions and said he would deliver judgment by January 15, or earlier if possible given the urgency of the case.