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FBD versus the pubs: insurance case delved into harsh realities facing pub trade during pandemic

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As publican Chris Kelly sat in the witness box of the Commercial Court, he told how his company paid FBD €3.5 million for insurance cover in the last 17 years.

n his view, the policy FBD sold him was in “simple English” and he couldn’t understand how it had gotten this far.

“I’ve lost total confidence in this [insurance],” he said. “We shouldn’t be here, but we are.”

Four pub groups are suing FBD over its refusal to indemnify them for losses incurred by the Covid pandemic. They’re not the only ones to take legal action against the insurer over Covid-19, but their lawsuits are being treated as test cases.

An extension in their policies outlined how cover would be triggered if the business was forced to close due to “outbreaks of a contagious or infectious disease on the premises or within 25 miles of same”.

In the case of Lemon & Duke, a side letter was furnished on March 2 to managing director, Noel Anderson, confirming his business would be covered for coronavirus if ordered to close.

Mr Anderson co-owns the Dublin bar with rugby players Sean O’Brien, Jamie Heaslip and brothers Rob and Dave Kearney.

“It’s a very successful business,” he said.

He predicted 2020 was going to be the best year Lemon & Duke had to date. But then coronavirus came along.

As someone who has worked in the pub trade for 20 years, he has a lot of friends in the industry, he told the court. In February, while enjoying a few pints in the Swan Bar with fellow publicans, he voiced concerns about the virus arriving in Ireland and impacting their businesses. They told him he was “stone mad” and the “master of doom”.

There was nothing to worry about, China was a long way away, they said.

Not long after, his friend Paul Mangan, owner of Devitt’s bar on Camden Street, phoned up to say, “I think you’re right about this effing thing” after his parents were placed on lockdown in a hotel in Tenerife due to a positive case on the premises.

Insurance was now the first port of call in preparing to protect the business from what was about to come, Mr Anderson told the court.

Lemon & Duke’s premium was up for renewal at the time, and after learning the current policy with Allianz wouldn’t cover coronavirus, Mr Anderson started to make enquiries.

Word on the grapevine was that FBD had a suitable policy.

He contacted John Reade, FBD’s head of business, a man he knew through his work as vice-chairman of the Licensed Vintners’ Association (LVA).

After numerous telephone calls, emails and a meeting with FBD sales executive Paul Shanahan – Mr Anderson believed he had finally found cover that would protect his business. He agreed to switch insurers for a price of €27,000 and a side letter guaranteeing the policy covered coronavirus.

But as the pandemic started to become more serious, FBD’s previous assurances didn’t seem so sure any more, he told the court.

On March 16, after the pubs had been ordered to close the previous day, Mr Anderson said he noticed a change in tone.

“I felt sick to my stomach” when FBD sent a letter in April withdrawing the representations previously made, he said.

The court this week heard from: Philip Byrne, owner of Sean’s Bar in Athlone; Chris Kelly, director of the Chris Kelly Group; Mr Anderson; two FBD employees; and a number of experts.

Mr Byrne told how his bar has remained shut since March 15 and he can’t find staff to work. Mr Kelly said 90pc of the 300 people working across the group have been laid off.

All of the publicans admitted their businesses are very profitable under cross-examination from Remy Farrell SC,for FBD.

Michael Cush SC, representing three of the pubs, said their profits are an issue of quantum and this case is “not about quantum, but liability”.

Paul Shanahan, giving evidence on day six of the hearing, told how he raised concerns the company “mis-sold” the policy to Mr Anderson and would face legal action as a result.

An email on March 20 from John Reade to various FBD staff stated the company’s policy does not cover pandemics and they were to relay this to customers.

Mr Shanahan replied to say he was “really concerned” about the content of this email as they had told Mr Anderson they would cover this interruption.

In his witness statement, he said he was not the type of person to “try to pull the wool over anyone’s eyes”.

“The last number of months have been a stressful period for me,” he said.

Kate Tobin, chief underwriting officer for FBD, in her evidence, described the side letter given to Mr Anderson as “very vague”.

It needed to be “made clearer” and was “incomplete”, she said.

“I would have advised that it needed to be made clearer that business interruption cover would not extend to a ‘general quarantine’ or what is now commonly referred to as a ‘nationwide lockdown’.”

This is the crux of FBD’s argument, that as the coronavirus is a global pandemic and not simply a local outbreak of a disease, the pubs aren’t entitled to recover all losses related to it.

Mr Cush asked if she watched Mr Anderson give evidence and whether he was justified in his anger, given he had switched insurers on the back of the representations made by FBD.

“I think it’s unfortunate it wasn’t made clearer to him the circumstances in which his policy would cover coronavirus and he wasn’t made fully aware of the details of the policy,” she said.

On the balance of the evidence heard, she agreed he was entitled to believe he was covered.

However, in her view, the infectious and contagious disease extension in the policy did not provide cover for coronavirus.

She did agree that the withdrawal of the representation made to him was “unfair”.

Evidence in the case has now concluded and the parties involved will make their summaries next week.

The outcome of the case is expected to have a significant impact on around 1,100 businesses.

Online Editors

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