With the March 2026 limitation deadline looming for Covid-19 business interruption claims, the Court of Appeal's recent judgment in Liberty Mutual Insurance v Bath Racecourse provides important clarity for policyholders seeking compensation for pandemic losses. The judgment is particularly significant for policyholders with composite policies intended to insure multiple entities within a corporate group.
The CA judgment deals with two important issues.
First, the CA considered whether 'furlough payments' made under the Government Coronavirus Job Retention Scheme are deductible from the indemnity payable by an insurer. In a finding that will be disappointing for policyholders with large workforces, the CA concluded that furlough payments did constitute a deductible saving. As a matter of commercial and economic reality, the policyholder did not have to bear the expense of wages bills meaning business outgoings were ultimately reduced.
Although, it is not all doom and gloom for policyholders. The second issue was whether the limits in a composite policy were separate for each insured entity or, alternatively, aggregate limits applicable to all claims by a corporate group. In an important finding for policyholders, the CA determined that the "any one claim" limits comprised separate limits for each of the insured entities within a corporate group. A reasonable policyholder would expect the limits to apply to each insured entity within a corporate group, and would not expect those limits to be eroded by another entity's claim.
The CA's finding was based on the proper interpretation of the specific "Denial of Access" and “Prevention of Access (Non-Damage)” clauses in the Liberty Mutual policies. Policyholders with composite policies should take advice on whether their particular policy wording responds in light of the CA's judgment.
What next for policyholders?
The countdown is now on for policyholders to pursue Covid-19 business interruption claims. Many claims will be time-barred from March 2026, meaning policyholders should pursue insurers for cover as soon as possible to avoid limitation issues.
Our specialist insurance coverage team can assist policyholders in pursuing claims and negotiating coverage disputes with insurers. Please get in touch with Garbhan Shanks.
