December 3, 2021

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Insurance policy ‘riddled with confusion’ should cover pandemic, says Cork hotel

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An insurer’s business interruption insurance policy is “riddled with obfuscation and confusion” and should be interpreted as providing cover for Covid-19 disruption, the Commercial Court has heard.

The claim was made by Richard Kean SC, for a Cork hotel suing a Slovenia-based insurer and a broker, on the first day of a case which, counsel said, has implications for several other similar businesses which were closed by the pandemic.

Coachhouse Catering Ltd, which runs the Old Imperial Hotel in Youghal, Co Cork, has brought the action over what it says is the refusal of the Zavarovalnica Sava insurance company to provide an indemnity for losses suffered under a business interruption insurance policy it provided. It is also suing the Irish broker Frost Insurance, trading as Frost Underwriting UQuote.

Coachhouse seeks declarations including that it is entitled to an indemnity under the policy for interruption/losses after March 15th last year when the first lockdown was announced.

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It also seeks a declaration that the closure order from that date constituted a loss and/or destruction and/damage to the property it uses for business. It also seeks damages for breach of contract including aggravated and/or exemplary damages.

The defendants deny the claims.

Website promise

Opening the case, Mr Kean said Zavarovalnica Sava. an insurer and re-insurer which made a €47.6 million net profit last year, promises on its website to “never leave you alone” and that it was caring and professional.

“It also says it gives you peace of mind, but the plaintiffs have not been given peace of mind, they have almost lost their minds”, counsel said.

The core of Coachhouse’s case is that the closure of the hotel caused loss and that the insurance policy was riddled with ambiguity, he said.

The defendants themselves did not know what the policy was about and as a policy which is riddled with obfuscation and confusion it should be interpreted in favour of his client, counsel said.

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Peter Mills, an insurance expert called on behalf of Coachhouse, told the court that under the general exclusions section of the policy in this case it did not specifically exclude pandemic risk “the presence of which would have made this litigation moot.”

Alan Grace, a retired insurance expert on behalf of the defendants, under cross-examination, said before Covid pandemics like SARS and Swineflu were “on the horizon” and some insurers chose to include them while others sought to reduce cover for them. Generally however, they did not put pandemic exclusions in the policy.

Asked by Mr Kean where was Covid specifically excluded in the Coachhouse policy, Mr Grace said it was not in the policy. He said the policy was not very well constructed and drafted.

The case continues before Mr Justice Denis McDonald. It is being heard both as a physical and remote hearing through the specially designed TrialView system.

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