Clarence Hotel claims it is entitled to compensation over lockdown losses

Brushfield Ltd, trading as the Clarence Hotel, claims, in Commercial Court proceedings, that it is entitled to be compensated for losses due to the lockdowns under its "enterprise" insurance policy with Axa.

It is suing the insurance company and the agent which provided the policy, Arachas Corporate Brokers Ltd. The company claims one consequence of the Covid-19 virus is acute encephalitis, an inflammation of the brain, with the effect they are covered for lockdown losses under an insurance policy.

The defendants deny the claims and a counter-claim is being made seeking declarations including that Brushfield’s losses are not covered.

Brushfield’s parent company is the Press Up hospitality group, which operates a large number of hostelries and entertainment outlets. It employed 1,700 people when the lockdowns started.

Opening a “significant test case”, Jim O’Callaghan SC, for Brushfield, said one of the objectives of this action was to achieve as much clarity as possible in relation to the interpretation of the terms of the policy and whether a valid claim could be made. The policy covers the hotel and its Octagon Bar.

Mr O’Callaghan said it was their case the insurance cover for loss was triggered where access to the Clarence was restricted or hindered for more than 24 hours by the actions of the Garda or a statutory body.

The restrictions were first imposed on March 15th, 2020 when then taoiseach Leo Varadkar told bars to close. While Axa said this announcement did not have any legal authority at that stage (regulations were brought in only in April), this argument was "detached from reality", counsel said.

A UK Supreme Court judgment last week on business interruption insurance found that any reasonable understanding by a similar announcement by the British prime minister on March 20th that certain businesses should close was a clear instruction that could be reasonably understood without inquiring into it, counsel said.

The court should be satisfied that the actions of the gardaí did restrict or hinder access to the hotel, and that the HSE and Hiqa, as members of the National Public Health Emergency Team (Nphet), satisfied the policy requirement in relation to statutory authorities.

That (restrictive) action, the policy states, must be in response to a disturbance or danger within a one-mile radius of the premises. The danger here was the spread of an infectious disease all over the country, he said.

List of diseases

The policy lists outbreaks of 26 human infectious or contagious diseases which trigger cover for business interruption. While Covid-19 was not listed, a 27th condition of acute encephalitis, while not a contagious disease, was known to be a consequence of an infectious disease, he said.

It has been shown that this condition is caused by the Covid-19 virus. The question that had to be asked was why acute encephalitis was there, and the only coherent explanation was that it was a known complication or consequence of an infectious disease, counsel said.

His side would seek to prove in the second module of the trial that if someone suffered from encephalitis as a result of contracting Covid within 25 miles of the premises, the policyholder was covered, he said.

Mr O’Callaghan also said when it came to insurance policies, they should be drafted so they were understandable not just by lawyers but to a reasonable person who had all the background knowledge in relation to the policy.

The policy must be interpreted with reasonable latitude and where there was ambiguity, it should be read against the drafter (the insurance company) and had to be viewed through the time that it was taken out, in this case 2019, he said.

The case continues before Mr Justice Denis McDonald.