FBD INSURANCE PLC has set aside €22 million to cover potential costs in case it loses a test case brought against it by pub owners over whether their policies with the insurer covers the disruption in trade caused by Covid-19. 

The test case, which is due to heard by the Commercial Court in October, will set a precedent for whether FBD’s pub policies provide cover for business interruption by what owners claim is an insurable risk.

Pub owners claim they are entitled to have consequential losses covered, however, that interpretation is disputed by FBD, who in April informed the pub owners that a pandemic does not fall within the scope of the clause.

The owners all dispute FBD’s stance that the policy of insurance does not cover the Covid-19 pandemic, and claim that the insurer is acting in breach of contract.

At a hearing last month, the court heard that FBD considers that the closures did not occur as a result of an outbreak of disease at the premises or areas where the pubs are located but as a result of measures taken at a national level that involved a nationwide closure of business.   

Justice David Barniville was told that there could be as many as 1,000 pubs and bars in the country affected by the dispute.

In a trading update this afternoon, the insurer said it remains “strongly of the view that our business insurance policies do not provide cover for a pandemic of this nature” but that a “precautionary reserve” of €22m had been made to cover costs that may be incurred. 

FBD said it is in the process of refunding motor customers as a result of the reduced car usage during the pandemic, which it says will cost approximately €7 million. 

It also expects additional costs of €7m as refunds are also being offered to commercial customers whose businesses have been closed.

The insurer said these refunds on its profits will be offset by the reduction in the “benign” frequency of motor injury, damage and liability claims experienced from mid-March to date.

“Overall, current claims experience will help mitigate the impact on profitability of refunds and business interruption costs. We remain confident in the underlying profitability, future growth prospects, capital strength of the business and in our ability to continue to provide excellent service to our customers,” FBD said.

Comments have been closed as legal proceedings are ongoing.