Supreme Court to decide furlough windfall issue

The Court of Appeal has granted leave to appeal to the Supreme Court in the case of Bath Racecourse Company Limited and others v Liberty Mutual Insurance Europe SE and others. The issue is whether furlough payments made under the Government Coronavirus Job Retention Scheme fall to be deducted from the amount payable by insurance companies, for business interruption losses, suffered by policyholders as a result of the Covid-19 pandemic. 

The claimants and appellants, being insurance policyholders, argue that the intention of the UK government’s furlough scheme was to support businesses and save jobs, not to subsidise insurers who have sought to deduct furlough payments from the business interruption payouts. 
The amounts in dispute are significant – billions of pounds - and fall to benefit policyholders if insurers are not allowed to deduct furlough payments from any indemnities paid out under relevant policies, or the insurance companies themselves if furlough payments can be deducted from any indemnity payments that insurers make.

The issue has been considered by the Courts before, but it is only now going to the Supreme Court. There are two linked appeals which relate to several business interruption insurance claims, which means there are a number of appellants. Each one had an insurance policy, insuring for certain business interruption losses, and the policies  contained what is described as a “prevention of access” clause. 

Appellants subsequently claimed business interruption losses and the respondent insurers have argued that credit should be given for furlough payments received from the Government as a result of the Coronavirus Job Retention Scheme. Such furlough payments, insurers argue, should be deducted from payments to policyholders by reason of a savings clause within the policies.. 
In the High Court, Jacobs J found that credit should be given for the furlough payments. The Court of Appeal agreed. The appellant policyholders have now appealed directly to the Supreme Court. 

This is one of the last remaining key battle grounds between insurers and policyholders, which was not addressed in the FCA’s Test Case. The outcome of the decision from the Supreme Court is highly awaited by insurers and policyholders as it will significantly impact the value of insurance claims that have not yet been resolved, five years after the COVID-19 pandemic. The final result is therefore much anticipated, with an obvious need for certainty in the outcome so that insurers and policyholders can finalise all claims that remain unresolved due to the legal question of how furlough payments should be treated for the purposes of quantifying the value of policyholders’ business interruption losses.