Last week, the High Court ruled against FBD Insurance in a landmark case taken by four publicans over FBD’s interpretation of its business interruption cover.

The High Court ruling stated that FBD must pay insurance on claims made by publicans relating to the forced closure of their premises due to COVID-19 restrictions.

The court also ruled that publicans can base their insurance claims on normal business levels, and not on the reduced level of trade caused by COVID-19 as argued by FBD.

Publicans

In short, FBD lost its High Court argument on all the major points of the case.

FBD has 1,100 pub customers with very similar insurance policies to those ruled on in the High Court last week, meaning it has significant exposure to claims from publicans.

The insurer said it expects to have proper details on the net cost of these claims when it reports its full-year results at the end of February

However, it’s understood FBD has reinsured up to 80% of these policies with large-scale reinsurance houses, meaning its financial liability may be limited.

FBD said it is now engaging with its reinsurance partners to estimate the net cost of paying out on all claims but said it anticipates the cost will be well within its forecasted range, for which it has set aside €30m to cover.

The insurer said it expects to have proper details on the net cost of these claims when it reports its full-year results at the end of February.

In 2020, FBD held back on paying out €35m in dividends due to the uncertainty created by COVID-19

Goodbody stockbrokers estimates the net cost could be in the range of €30m to €75m for FBD.

For farmer shareholders in FBD, the most pressing question will be what happens to the insurers’ annual dividend payout, which is important to a number of farmer organisations.

In 2020, FBD held back on paying out €35m in dividends due to the uncertainty created by COVID-19 and its 2021 dividend now looks in doubt too.

The company hinted it may still pay out its 2020 dividend at some stage this year.

Farmer Business Developments, the largest shareholder in FBD, is due to receive more than €8.5m of this dividend, while FBD Trust would receive €3m and the IFA would receive in the region of €0.5m.

However, the payment of any dividend by FBD could be in doubt, with other business sectors now calling for the insurance industry to honour claims made under business interruption policies.

Restaurants

Speaking to the Irish Farmers Journal, Adrian Cummins, CEO of Restaurants Association of Ireland (RAI), said close to 425 members of the RAI had contacted the organisation stating they had business interruption cover.

Of this, Cummins believes over 60% of these businesses will be able to make a genuine claim for business interruption cover.

However, Cummins said insurers are taking the view that last week’s High Court ruling related to so-called “wet pubs” only and not to businesses that serve food, which were able to open in a limited capacity during parts of the last year.

Cummins called on the Central Bank of Ireland to get its house in order and give some clarity to the hospitality sector in terms of claims for business interruption cover.