Victory for Publicans

Victory for the Publicans

Pamela Fitzpatrick assesses the recent judgment of Mr. Justice McDonald in the FBD Business Interruption cases

The Commercial Court has delivered its judgment in four test cases taken by publicans against FBD Insurance plc (“FBD”). The judgment was originally due to be delivered on the 15th January 2021, however this was deferred to allow the parties make legal submissions following the UK Supreme Court’s judgment in a similar test case, which was also delivered on 15th January. The eagerly awaited decision is of great significance to insurance companies and businesses throughout the country.

Background

The four test cases were taken by Hyper Trust Limited trading as the Leopardstown Inn; Aberken, trading as Sinnotts Bar; Inn on Hibernian Way Ltd trading as Lemon & Duke; and Leinster Overview Concepts Ltd trading as Sean’s Bar (the “Publicans”). Each of the Publicans hold policies of publican insurance with FBD (the “Policy”), which include business interruption insurance. They brought proceedings having been told by FBD that the losses the Publicans had experienced as a result of Covid-19 were not covered by the Policy. The principal question for the Court to consider in each of the four cases was whether FBD was obliged to cover any of the losses suffered by the Publicans following the closure of public houses in accordance with Government guidelines on the 15th March 2020.

The central dispute between the parties related to the interpretation of a clause in the Policy which stated that FBD would indemnify the Publicans for losses arising from the imposed closure of the premises by order of a government or local authority. In that regard, the Policy contained specific terms, which included, “as a result of the business being affected by imposed closure of the premises by order of the local or government authority following outbreaks of contagious or infectious diseases on the premises or within 25 miles”. FBD declined cover in respect of each of the Publican’s losses on the grounds that the imposed closure did not arise on foot of an outbreak of Covid-19 on any of the Publicans’ premises or within a 25-mile radius of the premises. FBD accepted that there was an imposed Government closure but that this closure could not be causatively linked to an outbreak of Covid-19 which occurred within a 25-mile radius of the Publicans’ premises.

What is the Insured Peril?

The Court in its judgment advised that during the course of the proceedings, the parties used the word “peril” as shorthand for the nature of the risk covered by the insurance policy. The Court was asked to consider the nature and extent of the insured peril. FBD submitted that the relevant peril was simply

Pamela Fitzpatrick is a solicitor in the Commercial and Business Team at Hayes Solicitors

the “imposed closure” of the Publicans’ premises. On the other hand, the Publicans maintained that the relevant peril was a composite one involving all of the integral elements of the disputed insurance policy clause, namely that the business was affected by (a) imposed closure (b) by order of a local or government authority, following (c) an outbreak of infectious disease on the premises or within a 25 mile radius.

The Court stated that instead of breaking up the clause and accepting that the nature of the peril was the imposed closure as suggested by FBD, the clause must be read as a whole and the words “imposed closure” could not be considered to be the relevant peril on their own. The Court further stated that this is how a reasonable person standing in the shoes of the parties to the proceedings would interpret the relevant clause. The Court found, inter alia, that the relevant peril was as put forward by the Publicans and it could not see any basis how the geographic limit could be excluded from the description of the peril.

The Court then undertook a detailed review of the meaning of specific words within the relevant disputed clause. The Court reviewed the meaning of the words “following”, “by” and “outbreak”. The Court found, inter alia, that the relevant clause relates to business interruption claims where that business interruption was shown to have been proximately caused by a government imposed closure which, in turn, has had as one of its causes, an outbreak of an infectious or contagious disease within 25 miles of the insured public house premises. The Court further held that it is not necessary for the insured to also establish that the outbreak was the proximate cause of the imposed closure so long as the outbreak was a cause.

Causation

The case raised a number of issues in relation to causation. FBD argued, inter alia, that the Publicans’ losses would have occurred in any event even in the absence of the occurrence of the insured peril. FBD maintained that the “loss or damage” was confined to loss or damage caused by the insured event and that the imposed closure of the Publicans’ premises could not be said to cause loss or damage affecting the results of the business of any of the public houses in question subsequent to their re-opening. FBD submitted that, once the imposed closures ceased, any loss suffered thereafter was attributable to the ongoing effects of Covid-19 which was not insured under the policy.

The Court accepted FBD’s contention that a “but for” test usually applies in determining whether the losses claimed by an insured under a policy of insurance The Court found, inter alia, that the relevant peril was as put forward by the Publicans and it could not see any basis how the geographic limit could be excluded from the description of the peril

The Court further stated that in the absence of clear language to the contrary, it would go against the nature of an insurance policy as a contract of indemnity, to allow the effects of the insured peril to reduce the payment to be made to an insured who has the benefit of cover for that peril

are caused by the insured peril. However, the Court also accepted that there are certain instances which give rise to a relaxation and modification of the “but for” test.

The Court found that where there are overlapping proximate causes of the losses, one of which in the case was the composite peril and the other being the alteration of societal behaviour in response to Covid-19, it was appropriate to modify the “but for” test. The Court found that where a loss is sustained as a result of two or more interrelated events which are each capable of causing the loss but where it is not possible to say that, but for any one of them, the loss would not have been incurred, it would be inappropriate not to modify the “but for” test in this instance where the common thread between the peril on the one hand and societal reaction on the other is the presence of Covid-19.

Trends and Circumstances

Part of the dispute between the parties related to whether the fall-off in sales suffered by the Publicans in the days preceding the Government-imposed closure on 15 March 2020, constituted a trend or circumstance that should be carried forward into the period of closure i.e. whether those losses should be assumed to continue throughout that period.

The Publicans accepted that, to the extent that they suffered a drop in sales in the days immediately prior to the 15th March 2020, that should be taken into account when calculating the takings during the twelve months immediately before the date of damage. The Publicans also accepted that the insured peril did not occur until the 15th March 2020 when the imposed closure was announced. However, the Publicans maintained that once the insured peril occurred, it would be contrary to principle if any element of the insured peril was to be taken into account in adjusting the amount of the payment to be made by FBD under the insurance policy.

FBD maintained that, under the “trends and circumstances” provisions of the insurance policy, any trends and circumstances affecting the business prior to the occurrence of the insured peril on the 15th March 2020, are to be taken into account in adjusting the amount to be paid, even if they are ultimately part of the composite insured peril. The Court rejected this approach and found that in applying the “trends and circumstances” provisions of the insurance policy, one must exclude the effects of the insured peril from the calculation. The Court further stated that in the absence of clear language to the contrary, it would go against the nature of an insurance policy as a contract of indemnity, to allow the effects of the insured peril to reduce the payment to be made to an insured who has the benefit of cover for that peril.

The Indemnity Period

The Court rejected a claim by the Publicans’ that they were entitled to maintain a claim against FBD for the continuing effects of the Covid-19 pandemic on their businesses even after any period of imposed closure comes to an end. However, the Court held that to the extent that the Publicans can show their businesses continue to be affected by the composite peril after the period of imposed closure comes to an end, they are entitled to be indemnified for those losses until the losses cease or the indemnity period comes to an end (whichever is the earlier).

Lemon & Duke

The circumstances in which Lemon & Duke’s policy was put in place was quite different to the other Publicans. Unlike the other Publicans, the Lemon & Duke policy was put in place after the threat posed by Covid-19 first emerged. Furthermore, Lemon & Duke maintained that its policy was also put in place following the making of a specific representation in relation to the business interruption cover available under the Policy. On foot of its differentiating circumstances, Lemon & Duke made an additional claim for misrepresentation and for aggravated damages. The Court rejected this claim on the grounds that, inter alia, the conduct of FBD did not approach the standard which would justify an award of aggravated damages. The Court also noted that although a claim for damages was pleaded in the summons and statement of claim, Counsel for Lemon & Duke did not raise the issue before the Court until delivery of its written closing submissions immediately prior to the closing oral submissions.

Conclusion

While the Court’s judgment is certainly a victory for the Publicans, the issue as to the quantum of the losses covered by the Publicans’ policies is due to be addressed at a later stage. This will include the question of whether the Publicans’ claimed losses were proximately caused by the composite peril. In simple terms, that means that the Court will consider whether the closures following the outbreaks of Covid-19 were an effective (i.e. proximate) cause of some of the claimed losses.

Furthermore, the Court still has to consider the concept of disaggregation at the quantum hearing. FBD maintained that, when looking at what would have been the position of the Publicans’ businesses but for the occurrence of the insured peril, their businesses would have been severely impacted by the requirement for physical distancing and by a fear among the population about the risk of contracting Covid-19. In contrast, the Publicans argued that it would simply be impossible to disaggregate the losses in that way.

Ultimately, the Court found that the Publicans’ Policy covers losses caused to their businesses on foot of Covid-19. This decision will be of great importance to many policy holders throughout the country and it will allow them to recover for losses caused to their businesses following the imposed closures in accordance with Government guidelines on 15 March 2020. In addition, the quantum hearing will provide further clarity and guidance to affected parties. Irish insurers and policy holders will no doubt be reviewing their policy wordings in light of the decision and the cost implication for insurers is likely to be significant. The extent of these cost implications will become clearer following the quantum hearing. P

Mark Kelly is an associate solicitor at Fieldfisher working primarily in litigation and employment-related disputes

Discovery of CCTV in Litigation Proceedings

Mark Kelly examines the recent High Court decision of Mr. Justice Barr in Dudgeon v Supermacs Ireland Ltd., [2020] IEHC 600 which has prompted discussion around access requests under Article 15 of the GDPR and Section 91 of the Data Protection Act 2018

Justice Barr held in this case that Supermacs was not obliged to disclose CCTV recordings of an incident to a person identifiable on the recording and who claimed damages for injuries resulting from that incident.

Facts of the Case

An appeal was brought to the High Court by the Plaintiff against the refusal of Groarke J. in the Circuit Court of an application for discovery of the CCTV recording taken at the Supermacs premises in Galway on 6 January 2017. The Plaintiff ordered food and “sat on a chair which broke, resulting in her falling to the ground and as a consequence whereof she sustained personal injuries, loss, damage, inconvenience and expense, which are ongoing.” Supermacs admitted that the chair was defective, but denied that the Plaintiff had “fallen to the ground” as a result of the defect in the chair. This was a central feature of the mechanics of the accident and alleged injuries.

Proceedings issued in the Circuit Court and voluntary discovery was sought from Supermacs, to include the CCTV of the incident.

Before Mr Justice Barr, it was submitted on behalf of the Plaintiff that CCTV footage represents the best evidence that can be obtained in relation to the happening of an event, as it records what took place in real time, at the relevant time. The Plaintiff relied on the decision in McNamara v Dunnes Stores (Parkway) LTD [2017] IEHC 172, where Murphy J. concluded that CCTV footage depicting an incident that took place in a supermarket was “crucial” in determining whether the incident amounted to defamation.

Supermacs submitted that discovery of the CCTV footage was only being sought on behalf of the Plaintiff to verify her recollection of the alleged incident and to essentially “mend her hand” before giving evidence at the trial. It was submitted that was not a proper purpose for which discovery ought to be ordered against Supermacs.

In his decision, Mr Justice Barr questioned the true purpose of the Plaintiff obtaining the CCTV footage of the incident and was satisfied that the discovery was only being sought to verify the Plaintiff’s assertion that she fell to the ground. The application was refused on that basis.

Discovery v. Access Requests – What to take from this Judgment

Mr Justice Barr’s decision is focused on the law concerning discovery and is not related to data protection rights and the right to request access to personal data. Data controllers remain obliged to fulfil access requests in relation to CCTV footage, unless subject to a restriction under the GDPR or relevant data protection legislation.

This decision does not materially affect the right to access such CCTV. It merely clarifies that such access needs to be sought in the right forum and in the right context / purpose. Commenting on the Supermacs decision, the Data Protection Commission stated that it “will continue to support data subjects and controllers in giving effect to all aspects of data protection law in this respect”. P

Mary MacNeill - A Tribute

Mary was one of a kind. A wonderful, warm person who enjoyed good company and a little bit of mischief

The legal community was greatly saddened with news of the passing of Mary MacNeill on the 20th December 2020. Mary was a solicitor with Cullen & Co. Solicitors in Inchicore and was a vibrant and wonderful colleague.

A proud Mayo woman, Mary’s late father Brian (Barney) was a member of an Garda Síochána and was stationed in Ballinrobe throughout the sixties. He miraculously avoided death in early October 1972 during a visit with his mother in Clones when a nearby bomb exploded. However, he was tragically killed subsequently whilst in the line of duty a week later. As Mary was the eldest of seven, responsibility fell to her to help her mother raise the family. They later moved to live in County Monaghan. Mary started out as a secretary with George Knight and Co in Clones. As her career progressed, she moved to Dublin where she commenced working with Colm Gaynor of Gaynor & Co – an employment relationship that was forged over the following three decades.

Mary decided in later years to study to become a solicitor and she did her apprenticeship with Colm Gaynor and qualified as a solicitor.

Sadly, Mary was diagnosed with a terminal illness in the summer of 2020. She bravely fought the illness and whilst she responded very well to treatment, it sadly was too late. She had less than six months from diagnosis to her passing. Mary had so much more life to live – people to meet and places to go. It wasn’t to be, unfortunately.

Colm Gaynor, a Consultant now with Margetson & Greene Solicitors said of Mary: “It was a privilege to have known and worked with the late Mary MacNeill for more than 30 years. Mary’s integrity, diligence, common sense and good humour were renowned. Her faith and courage during her illness was to be expected. I was greatly saddened by Mary’s death as were my family and colleagues at Baggot Street.”

In 2005, Mary joined Mary Cullen in Inchicore. “Mary loved law and being a solicitor. She always spoke about her father as a person who upheld the finest traditions of An Garda Síochána and I think Mary applied this to her professional life as a solicitor,” said Mary Cullen. “Following on her father’s example, she was a great believer in justice and fairness and saw the pursuit of these standards as pivotal and central to the role of the solicitor. Nothing pleased Mary more than a David –v- Goliath situation and in these situations she would never be found wanting. Once she took on a case, she became fully committed to the resolution of the case and could be a true force of nature in such pursuit.

“Mary was an excellent negotiator and again, would pursue negotiations to the Nth degree, while at the same time being utterly pragmatic. In dealing with colleagues, Mary set the highest standards for herself, and in return very much expected the same from her colleagues.

“It was a great shock to us all here when Mary was diagnosed as terminally ill last July. However, again as testimony to her love of the profession, following her diagnosis she again requested that files would be given to her, so she could carry out some work while ill at home. She will be very sadly missed.”

John Geary, editor of the Parchment first got to know Mary while working at Margetson & Greene. “Mary was one of a kind. A wonderful, warm person who enjoyed good company and a little bit of mischief. She is such a tremendous loss to her family and friends and to the legal profession. I was very sad to hear of her passing. We had spoken a few months before her death and she was her amazing self – upbeat, positive and cracking jokes. She regaled stories of great former colleagues like Val Timon, John Darley and Jean Cullen. Mary was a ‘different class’ – she had everyone’s respect; she had integrity in spades and she made a great impression on people. Ar dheis Dé go raibh a hanam.” P

Rachel Turner is a partner in Litigation and Dispute Resolution at Dillon Eustace

Can Insurers Refuse Cover for late Notification?

Rachel Turner reviews the recent High Court case of Moloney v Cashel Taverns Limited (In Voluntary Liquidation) & Anor (10 December 2020)

The High Court held that an insurance company was justified in refusing indemnity to its insured where the insured was fully aware of the incident giving rise to the claim but failed to promptly notify them.

Background

The plaintiff suffered an accident at work while working for Cashel Taverns Limited (“the insured”), injuring her ankle and shoulder. The plaintiff initially brought proceedings against the insured only and was awarded general damages in the sum of €35,000 and special damages in the sum of €2,332. However, as the insured was subsequently put into voluntary liquidation, the plaintiff applied to join the insurers of the insured as a co-defendant to the proceedings pursuant to section 62 of the Civil Liability Act 1961.

The insurance company had not been notified of the incident giving rise to the claim until some 17 months after it happened (the insured only notified the insurance company when the “letter before action” was received by it) and made it clear, from the outset, that it was reserving its rights under the insurance policy. After its investigations, the insurance company advised the insured that it would not be providing an indemnity in relation to the claim. The insurance company contended in the High Court that it was entitled to repudiate liability and that it had validly refused to indemnify the claim. The High Court was asked to determine if the insurance company was obliged to pay the damages awarded to the plaintiff in the initial proceedings.

High Court

The High Court (Heslin J.) found that the insurance policy placed a clear obligation on the insured to notify claims promptly and the facts before the court showed that the insured failed to do so.

The insured argued that knowledge of the incident was held by the manager, as opposed to a director of the company, and that as a “manager” was defined as an “employee” in the policy, the manager’s knowledge of the incident did not constitute knowledge on the part of the insured. The Judge rejected this on the basis that the policy does not refer to whom, within the insured, must possess the knowledge and held that the only reasonable interpretation of the policy was that the insured was obliged to notify insurers of the incident promptly once it became aware of it.

The Judge viewed the fact that the insured had been dealing with PIAB (Personal Injuries Assessment Board) in relation to the claim, and had made decisions at various points without reference to the insurance company, as evidence that the insured knew it did not have insurance cover for the accident.

Accordingly, the court found that the insurance company was entitled to repudiate liability and the plaintiff’s claim against it was dismissed.

Comment

It was stated to be common case between the parties in the above matter that it was not necessary for the insurance company to prove that it had suffered prejudice in order to refuse indemnity on the basis of late notification, albeit the court noted that it was clear from the evidence that the insurance company regarded itself as having suffered prejudice arising from late notification.

It is worth noting that since the events giving rise to this case took place, the majority of the provisions of the Consumer Insurance Contracts Act 2019 (“the act”) were commenced with effect from 1 September 2020. Section 16(3) of the act now provides that where non-compliance by a consumer (which includes a small business) with a specified notification period does not prejudice the insurer, the insurer shall not be entitled to refuse liability under the claim on that basis alone.

Further, section 21 of the act now provides that third parties can claim directly against an insurer in circumstances where the insured is deceased, cannot be found, is insolvent, or where the court believes it is just and equitable for them to do so. The act makes clear, however, that the insurer has the same defences to an action brought by the third party as the insurer would have in an action by the person. P Section 16(3) of the act now provides that where noncompliance by a consumer (which includes a small business) with a specified notification period does not prejudice the insurer, the insurer shall not be entitled to refuse liability under the claim on that basis alone