The Reckless Company Director Many companies are affected by the ongoing Covid-19 pandemic. Sean O’Sullivan identifies issues that directors ought to consider in order to minimise the risk of incurring personal liability for the company’s debts
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he cost of the coronavirus / Covid-19 pandemic to the Irish and global economy is still to be counted and, despite promising recent news on vaccines, it will continue to affect all our lives for the immediate future. The effect on small and medium Irish businesses, in particular, is yet to crystallise, with so many yet to reopen to any significant or permanent degree. While I consider the potential life-line of business interruption insurance and the awaited High Court judgment in relation to same, this article is primarily intended to assist solicitors in advising directors of companies affected by the ongoing Covid-19 pandemic and the steps they ought to take if they find their businesses in a precarious state. It will also hopefully be useful in advising creditors and/or liquidators who may consider bringing claims for reckless trading against delinquent directors.
Business Interruption Claims By letter of 27 March, 2020, the Central Bank set out its broad expectations of insurers regarding pandemicrelated claims, and in Guidelines published on 5 August, 2020 set out its specific expectations regarding claims under policies including coverage for pandemic-related business interruption losses. 8 the Parchment
However, and on foot of separate advices it received, FBD Insurance PLC refused coverage under a number of policies which purported to cover business interruption losses, on the basis that such coverage did not extend to losses incurred due to a pandemic, such as has resulted from the coronavirus / Covid-19. Over 11 days in October 2020, the High Court (McDonald J.) heard claims by four licensed premises that the refusal of coverage by FBD Insurance plc was unlawful. The main issues raised before the High Court concerned interpretation of the contracts of insurance, including: • Whether there was cover for the effects of a pandemic or “disease”; • Whether the imposed closures arose from localised outbreaks; • Whether the losses resulted from the insured peril; • Whether the insurance covered only periods of enforced closure; and • Whether the trend in turnover prior to closure is relevant to the assessment of damages. While the High Court reserved its judgment, which is expected early in 2021, for guidance we look to the English High Court’s judgment in Financial Conduct Authority v Arch Insurance, [2020] EWHC 2448 (Comm) which was relied upon in submissions made
