The High Court has dismissed Headfort Arms Limited’s claim against Zurich Insurance PLC for business interruption losses arising from the hotel’s closure during the COVID-19 pandemic.
Mr Justice Denis McDonald ruled on 24 September 2021 that the hotel’s temporary inability to use its premises did not amount to “Damage” to insured property under the policy. The business interruption cover required damage at the premises to property used for the business, as well as material damage insurance covering that damage. The court found those requirements were not met.
Headfort Arms Limited, which trades as the Headfort Arms Hotel, argued that the policy’s definition of “Damage”—“loss or destruction of or damage to the Property Insured”—included loss of use. It sought indemnity for financial losses following the hotel’s closure in March 2020 after Government measures responding to the pandemic. Zurich argued that the policy covered business interruption resulting from damage to property, not a temporary loss of use caused by restrictions.
The judgment records that the hotel closed on the evening of 15 March 2020, after Government advice that public houses and bars should close. The court noted that the hotel’s own account also identified a COVID-19 outbreak at the premises and staff concerns as factors in the closure. A national lockdown followed on 27 March, requiring non-essential businesses to close.
The judge interpreted the policy as distinguishing damage or loss affecting insured property from the business interruption that may follow. In context, “loss of” insured property referred to loss of the property itself, such as stock disappearing, rather than a temporary inability to use the hotel. The judgment also noted that the policy gave Zurich an option to reinstate or replace insured property, and required material damage cover to be in place for a business interruption claim.
The court observed that Zurich had offered disease-related extensions for an additional premium, but the hotel had not sought them when arranging the policy. The judge concluded that the policy did not cover the interruption claimed and that the hotel had not established the required damage or corresponding material damage cover.
The proceedings had initially included an application for an interlocutory injunction. By agreement, the parties instead asked the court to determine coverage liability on the existing affidavit evidence as a full and final hearing. The proceedings were also treated as a test case under a Central Bank framework. The court dismissed the claim. It listed the matter remotely for 13 October 2021 to address further issues, including costs, and directed the parties to file written submissions within 28 days of electronic delivery of the judgment.