High Court: FSPO decision that insurer acted unreasonably in declining cover for Covid-19 losses upheld

High Court: FSPO decision that insurer acted unreasonably in declining cover for Covid-19 losses upheld

The High Court has dismissed an appeal from an insurance provider against a decision of the Financial Services and Pensions Ombudsman (FSPO) that it acted unreasonably by declining to cover losses to a business arising from the Covid-19 pandemic.

Hiscox SA had brought a statutory appeal claiming that the interpretation of the insurance policy was highly complex and an adverse interpretation was not inherently unreasonable or unjust.

Delivering judgment in the case, Mr Justice Paul Burns held that a deferential standard of review applied to decisions of the FSPO. The determinations of unreasonable or improper conduct were determinations of fact which the court would not interfere with. The court held that the insurer had failed to establish that the findings were vitiated by serious and significant error and, as such, the decision was upheld.


The complainant was a company which operated a children’s activity and play centre. At the outset of the Covid-19 pandemic, the company closed the business in line with government advice. The complainant had a policy of insurance with Hiscox, which included business interruption losses.

In March 2020, the complainant notified Hiscox of a claim for business interruption losses under the policy. However, Hiscox declined to cover the claim. It was reasoned that the losses were not directly caused by an insured peril, the restrictions were not imposed specifically on the complainant’s premises and the premises had closed without an instruction from the HSE.

Following the declinature, the complainant made a complaint to the FSPO. Under section 60(2)(b) of the FSPO Act 2017, a complaint could be upheld if “the conduct complained of was unreasonable, unjust, oppressive or improperly discriminatory in its application to the complainant”.

Prior to a final decision being made, the UK Supreme Court delivered judgment in The FCA v. Arch Insurance (UK) Limited & Ors. [2022] UKSC 1, which rejected the interpretations relied on by Hiscox in the present case. A final decision issued in May 2021, in which the FSPO upheld the complaint and ordered the advance payment of €25,000 to the complainant under the policy together with a further €5,000 in general compensation.

Hiscox appealed the decision to the High Court arguing that the determination contained a number of serious errors. In particular, it was said that Hiscox could not have acted unreasonably by declining cover where it genuinely believed that its interpretation was correct at the time. It claimed to have acted in a bona fide manner and noted that, following the FCA decision, it had conceded that the complainant was entitled to business interruption coverage.

High Court

Mr Justice Burns began by noting the test which was to be applied in statutory appeals. Considering Ulster Bank Investment Funds Limited v. Financial Services Ombudsman [2006] IEHC 323, Hiscox was required to prove that the adjudicative process as a whole was vitiated by serious and significant errors. Additionally, a deferential standard applied to the findings of the FSPO as she had specialist knowledge and expertise. However, no deference was required in respect of questions of pure law.

The court then analysed the decision of the FSPO. It was noted that the FSPO had decided that the wording of the policy was clear and unambiguous. The FSPO assessed each of the reasons which were put forward by Hiscox to the complainant for declining cover and held that none were satisfactory. As such, the FSPO had determined that the declinature was incorrect and unreasonable, and Hiscox ought to have admitted the claim.

The court observed that section 60(2)(b) contained several grounds for upholding a complaint as the words “unreasonable”, “unjust” and “otherwise improper” were independent concepts. While these words were not defined in the Act, it did not mean that the FSPO had carte blanche to apply these concepts as she saw fit, the court said.

The court noted that a bona fide reliance on a contractual interpretation, even if wrong, was unlikely to amount to unreasonable or unjust conduct. However, if this denied a benefit under a contract, then this was a breach of contract and contrary to law.

It was held that the FSPO took the view that it was unreasonable and unjust for the insurance claim to be prejudiced by the complainant company closing on foot of advice from government. However, this was the precise basis on which Hiscox sought to decline cover, despite Central Bank correspondence which indicated that this should not occur.

It was held that determinations as to unreasonable, unjust or improper conduct were determinations of fact and therefore due deference had to be shown to the FSPO’s decision. While Hiscox’s unreasonable conduct could be viewed as marginal, it was not for the court to strike down the findings, it was held.

Further, the finding of unjust conduct was “less of a marginal call” in light of the facts of the case. The FSPO had all the evidence of the insurer declining cover and it was subsequently admitted that the declinature was wrong in law. The guidance document from the Central Bank was also significant in determining whether the reasons for declinature were unjust.

As such, Hiscox failed to establish that there was a serious or significant error in the FSPO’s decision. The court accepted that the decision could have been constructed in a more cogent fashion, but the FSPO properly identified reasons which supported her decision.

On the issue of remedy, the court noted the submission from Hiscox that the direction for preliminary payment of €25,000 was unnecessary because cover had been conceded. Further, it was said that there was no rational basis for the figure. The court noted that the FSPO had a very wide discretion regarding remedies (Governey v. Financial Services Ombudsman [2015] IESC 38) and there was evidence that the complainant had suffered considerable hardship and inconvenience. The court was satisfied that the FSPO could mitigate this adverse position by directing the interim payment. Although there was some risk that €25,000 was excessive of what would actually be due to the complainant, the decision was capable of being supported by the evidence before the FSPO.


Taking the adjudicative process as a whole, the court was not satisfied that any serious or significant error had been identified by Hiscox. As such, the appeal was dismissed.

Hiscox SA v. The Financial Services and Pensions Ombudsman [2022] IEHC 557

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