In a letter to client-publicans FBD stated that the present pub closure was the result of “national considerations” rather than it being a localised outbreak of a contagious disease.
In this letter, FBD pointed out that it would indemnify the insured as a result of a number of factors including the business being affected by Clause 1(d), “Outbreaks of contagious or infectious diseases on the premises or within 25 miles of same”.
However in giving the reasons for refusal to pay out it cited two in particular, stating:
“A requirement of cover is that any closure would have to be a closure following outbreaks of contagious or infectious disease in the premises or within 25 miles of same. That requires that the closure be caused by outbreaks of contagious or infectious disease on or within 25 miles of the premises. The closure on any view was not caused by outbreaks of disease on or within 25 miles of the premises, rather it was caused by national considerations resulting from the global pandemic including, in particular, the requirements of social distancing.
“2. It is clear that taken as a whole, clause 1 (d) does not cover the Covid-19 pandemic and could not reasonably be interpreted to extending to such a situation. It is clear from sub clause 1 (d) that the cover provided is cover in respect of outbreaks of contagious or infectious diseases particularly to a locality. A pandemic manifestly does not fall within the clause of the scope. The WHO Covid-19 declared pandemic is by its nature, scale and consequences entirely different to localised outbreaks of contagious or infectious diseases that might reasonably have been contemplated by the parties when this policies [sic] was entered into.”
The letter continues, “It is clear from clause 1 (d) that the agreement to indemnify in respect of the risks at 1 (d) is provided only where the business interruption loss has been caused by matter specified at 1 (d). “It is quite clear having regard, inter alia, to social distancing practices (including now the restriction on more than four people gathering together outdoors) and the widespread public concern regarding the risk of infection, any business interruption loss has been caused by such social practices and public concerns and not by clause 1 (d).”
Insurance companies in general have reflected this view in stating that most business interruption clauses do not take account of a global pandemic.
This has led to anger and frustration in the hospitality trade who’d hoped to pay staff and cover this and other losses in earnings through their insurance cover.
One company, Axa, is expected to honour some 4,300 small business claims in this respect.
Hospitality industry anger & frustration
Other reasons given by insurance companies for not honouring payouts to publicans have included the ‘voluntary’ closure of pubs and other hospitality businesses thus bringing into question the ‘business interruption’ clause and the non-specification of ‘Covid-19’ on the policy or where Covid-19 was stated, no case of Covid-19 was reported on the premises in question, according to Sinn Féin’s Finance spokesman Pearse Doherty who’d been contacted by hundreds of firms and small businesses around Ireland.
“This is not only deeply cynical but implies that the only way businesses can access cover is by remaining open until a customer or worker contracts Covid-19,” he told the Irish Examiner recently, “Thankfully, businesses that have closed have a greater regard for public health than insurers do for their customers.”
He added that he does not believe the insurance industry is following the Central Bank’s advice to rule in the claimants’ favour if there was ambiguity in the scope of cover.
This was part of the problem, he continued, “…it isn’t enough for the Central Bank to publish advice without it being enforced. It is our view that a significant sample of cases should now be audited and then published. This will require clarity that insurers must pay out where there is cover for business interruption or even ambiguity. And it would pressure insurers to do the right thing.”
The Vintners Federation of Ireland received confirmation recently from both FBD and Allianz that ‘business interruption’ is not covered as a result of Covid-19 and it has criticised the insurance companies for this, pointing out that claims were being rejected on the basis that the pandemic had only led to a “voluntary” closing of pubs and other retail outlets.
But while the insurance industry is claiming that policies for communicable diseases and viruses do not specifically cover this virus, the Minister for Finance appears to be saying that if the pubs were asked by the Government to close, then that should be taken as an instruction to them to close.
de facto Government directive in place
There was now in place a de facto Government directive to close in that any pub found open would now be forcibly closed.
“Where a policy states that a claim can be made when a business has closed as a result of a Government direction, because of a general notifiable infectious disease, the Minister believes that Government advice to close a business amounts to the same thing,” a spokesman for the Department said (and the insurance industry appears to have conceded this point last Friday).
“He believes that insurers should not try to distinguish between these situations, where there is a general infectious disease provision in a policy.
“In relation to business interruption insurance, whether a business can make a claim in relation to loss of earnings because of closure due to Covid-19 will depend on the specifics of their policy,” the spokesman said, “However, the Minister, as a general rule, believes that insurers should not attempt to reject claims on the basis of interpreting policies to their own advantage.”
But even if the Coronavirus question is resolved satisfactorily, there remains the distinct possibility that the amount of any ‘business interruption’ compensation may be well down on what publicans expect. Payout amounts would be related only to the business they’d have lost had they continued trading through the pandemic rather than the considerably more hearty income figure of the last 12 months.
The hospitality industry nationally has been heavily critical of the insurance industry for the stance they’ve taken on this issue and the VFI remains in ongoing dialogue with the Department of Finance about the “insurance sector’s refusal to accept claims arising from the Covid-19 crisis” with the Federation stating recently that, “If the insurers refuse to process legitimate claims we would expect to see some members taking legal action”.
They may have a case with the Minister for Finance having already stated that he believes that there is “a need for flexibility and pragmatism from insurers in relation to the payment of premiums, renewal of policies and use of premises due to the significant reduction if not complete cessation of income for many businesses which in turn has much reduced the risk exposure of insurers.”
Consequently, he had directed officials from the Department of Finance to engage with Insurance Ireland on how best the insurance industry can support their business customers in the current challenging economic climate.
Officials at the Department of Finance recently held discussions with Insurance Ireland together with most of the key insurers here and it was agreed that they’d reduce premiums for business customers reflecting the reduced level of exposure as a result of Covid-19 closures.
The European Insurance and Occupational Pensions Authority has urged that, “at the current juncture (re)insurers temporarily suspend all discretionary dividend distributions and share buy backs aimed at remunerating shareholders. This suspension should be reviewed as the financial and economic impact of the Covid-19 starts to become clearer”.
However at the same time it “requires that (re)insurers take all necessary steps to continue to ensure a robust level of own funds to be able to protect policyholders and absorb potential losses”.