Charwin Ltd T/A Charlie's Bar v Zavarovalnica Sava Insurance Company D.D.

• Jurisdiction: Ireland
• Judge: Mr. Justice David Barniville
• Judgment Date: 14 July 2021
• Neutral Citation: [2021] IEHC 489
• Docket Number: [2021 No. 2204 P.]
• Court: High Court

Between

Charwin Limited T/A Charlie's Bar

Plaintiff

and

Zavarovalnica Sava Insurance Company D.D.

Defendant

[2021] IEHC 489

[2021 No. 2204 P.]

THE HIGH COURT

COMMERCIAL

JUDGMENT of Mr. Justice David Barniville delivered on the 14 ^th day of July, 2021

Index

1. Introduction	1
2. Summary of Decision	2
3. The Parties	3
4. The Policy	3
5. Background to the Defendant's Article 8(1) Application	3
6. The Defendant's Article 8(1) Application	5
7. The Potential Time Bar Issue	5
8. The Legal Principles Applicable to the Defendant's Article 8(1) Application	6
9. The Scope of the Arbitration Agreement	9
10. The Non-Arbitrability Issue	23
11. Conclusions	34

1. Introduction

1 . This judgment determines an application made by the defendant insurer in proceedings commenced by the plaintiff in which the plaintiff seeks various declarations and damages against the defendant under an insurance policy arising from the closure of the plaintiff's public house in Loughrea, Co. Galway in March, 2020 as a result of the outbreak of SARS-CoV-2 (“COVID-19”) in the State. The defendant has applied for orders under Article 8(1) of the UNCITRAL Model Law (the “Model Law”) referring the parties to arbitration and staying the proceedings.

2 . While several sets of proceedings involving insurance claims arising from the COVID-19 pandemic have been commenced and have been entered in the Commercial List, a number of which have already been heard and determined, and while, in some cases, the parties have agreed that some or all of the matters in issue be referred to arbitration and the proceedings stayed, this is the first case in which the court has had to resolve a disputed application to refer the parties to arbitration and to stay the proceedings on foot of a clause contained in the relevant insurance policy in these COVID-19 related claims.

3 . The defendant's application was opposed by the plaintiff on various grounds. The first and fundamental ground of opposition was that the plaintiff contended that the dispute between the parties was not arbitrable on the grounds that it gave rise to fundamental issues of public policy which were not capable of being determined at arbitration. Subject to that fundamental contention, the plaintiff contended that, on a proper interpretation of the provisions of the relevant clause in the policy, a part, at least, of the case pleaded against the defendant did not fall within the scope of the clause and that, as a consequence, if the court were disposed to referring the parties to arbitration and staying the proceedings, it should only do so in respect of that part of its case which the court was satisfied came within the scope of the clause and should refuse to do so in respect of the balance of its case.

2. Summary of Decision

4 . For reasons which I explain in detail in this judgment, I have found against the plaintiff on its fundamental point that the dispute between the plaintiff and the defendant is not arbitrable and that the court should refuse the defendant's application on that basis. I am satisfied that the dispute is clearly arbitrable and that there is no reason to conclude otherwise on the grounds of public policy.

5 . As regards the scope of the arbitration clause in the policy, I have concluded that that part of the plaintiff's case which concerns the interpretation of the clause and the plaintiff's claimed entitlement to an indemnity under the policy is clearly covered by the terms of the clause. As a consequence, I have concluded that I am bound by Article 8(1) of the Model Law to refer the parties to arbitration in respect of that part of the plaintiff's case. However, I have concluded that, having considered and applied the relevant principles of interpretation applicable to contracts in general, to arbitration agreements and to policies of insurance, that part of the plaintiff's case which seeks damages as against the defendant pursuant to s. 44 of the Central Bank (Supervision and Enforcement) Act, 2013 (the “2013 Act”) for the alleged breach by the defendant of certain alleged regulatory obligations does not fall within the scope of the clause. In those circumstances, I refuse the defendant's application to refer the parties to arbitration in respect of that part of the plaintiff's case which will, therefore, remain to be determined by the court in these proceedings.

3. The Parties

6 . The plaintiff is a limited liability company which is the owner and operator of a public house called Charlie's Bar in Loughrea, County Galway. In its statement of claim, the plaintiff pleads that it employs seventeen people on a full-time basis and fourteen people on a part-time basis. The plaintiff's business has been severely affected by the outbreak of COVID-19 in Ireland and the significant restrictions imposed on public houses in the period since 15th March, 2020.

7 . The defendant is an insurance company which is incorporated in Slovenia. It is regulated by the insurance supervision agency of Slovenia. The defendant carries on business within the State subject to the conduct of business rules of the Central Bank of Ireland (the “CBI”). In its statement of claim, the plaintiff contends that the defendant is subject to certain regulatory obligations including those contained in the European Union (Insurance Distribution) Regulations, 2018 (SI No. 229 of 2018) (the “Insurance Distribution Regulations”) and the CBI's Consumer Protection Code, 2012 (the “CPC”) which was drawn up by the CBI under s. 117 of the Central Bank Act, 1989. The defendant appointed a managing general agent in Ireland, Frost Insurances Ltd (“Frost”), an Irish authorised insurance intermediary, to provide certain services on its behalf to Irish customers including underwriting and claims handling.

4. The Policy

8 . The defendant, through Frost, its managing general agent in Ireland, issued a policy of insurance to the plaintiff in respect of the period from 10th December, 2019 to 9th December, 2020. The policy was entitled “Strata Commercial Insurance” and comprised a schedule and a policy document (referred to for convenience in this judgment as the “policy”). The total premium in respect of the policy for the relevant period was €4,998.92. In its statement of claim, the plaintiff contends that the defendant made certain material revisions to the policy for the subsequent period, from 10th December, 2020 to 9th December, 2021. However, any such alleged material revisions to the policy do not appear to be relevant to the present application. The plaintiff claims that under the policy the defendant provided cover in respect of business interruption in the total sum of €175,000.00 and in respect of “loss of licence” in the sum of €100,000.

5. Background to the Defendant's Article 8(1) Application

9 . Following the outbreak of COVID-19 in Ireland in March, 2020, the plaintiff, as with all similar businesses and other businesses in the hospitality sector, was forced to close its public house for several months and thereafter was subject to severe restrictions on its operations. The plaintiff, through its insurance brokers, first notified a potential claim under the policy to Frost on behalf of the defendant on 23rd April, 2020. The plaintiff's brokers were informed that there was no cover under the policies written by the defendant for closure due to COVID-19, on 29th April, 2020. However, it appears to be common case between the parties that the first formal refusal of the plaintiff's claim under the policy came on 12th June, 2020 in a letter from Sedgwick to the plaintiff. Nothing turns on the date of this refusal for the purposes of the present application.

10 . Extensive correspondence was exchanged between the plaintiff's solicitors, McCann FitzGerald, and Dundon Callanan, who were the solicitors originally acting for the defendant and Frost in relation to the plaintiff's claim under the policy and in relation to the defendant's rejection of that claim. I am not concerned with the relative merits of the parties' respective contentions for the purposes of the present application. However, it is relevant to note that, at a relatively early stage, the plaintiff's solicitors were raising the possibility that its case against the defendant ought to be treated as a “test case” for the purposes of the CBI's “COVID-19 and Business Interruption Insurance Supervisory Framework” (the “Supervisory Framework”) and the defendant was disputing that assertion as well as raising the fact that there was an arbitration clause in the policy on which the defendant would be relying. Matheson Solicitors commenced corresponding on behalf of the defendant in December, 2020. It too disputed the plaintiff's assertion that these proceedings should be treated as a “test case” under the CBI's Supervisory Framework and confirmed that the defendant would be relying on the arbitration clause in the policy in the event that proceedings were issued and would seek a stay of any such proceedings. After a gap of a number of months, McCann FitzGerald wrote to Matheson again raising the suitability of the proceedings as a “test case” under the Supervisory Framework and contended that the proceedings were not appropriate for arbitration as they ought to be treated as a “test case” before the courts. Matheson continued to dispute that assertion on behalf of the defendant.

11 . In the meantime, proceedings were commenced by another plaintiff (Coachhouse Catering Ltd t/a “The Old Imperial Hotel”) against Frost and the defendant on 23rd March, 2021 (the “Coachhouse Catering proceedings”). Applications were brought by the defendant and by Frost in the Coachhouse Catering proceedings for orders under Article 8(1) of the Model Law referring the parties in those proceedings...