Rental Property Decision Reference 2022-0325

• Case Outcome: Rejected
• Reference: 2022-0325
• Date: 26 September 2022
• Year: 2022
• Subject Matter: Rental Property
• Finantial Sector: Insurance
• Conducts Complained Of: Rejection of claim

Decision Ref:

2022-0325

Sector:

Insurance

Product / Service:

Rental Property

Conduct(s) complained of:

Rejection of claim

Outcome:

Rejected

LEGALLY BINDING DECISION OF THE FINANCIAL SERVICES AND PENSIONS OMBUDSMAN

The Complainant is a landlord who was renting his premises to a tenant. He held a

Commercial Property Owners Policy with the Provider.

The Complainant’s Case

The Complainant submitted a claim to the Provider in February 2021 for the loss of rental

income when his Tenant, which trades as a public house and restaurant, ceased to pay the

Complainant rent, due to the temporary closure of the Tenant’s business, as a result of

measures imposed by the Government to curb the spread of the coronavirus (COVID-19).

In making this claim, the Complainant relied upon the following wording in Section 9 & 10,

‘Business Interruption Clauses’, of the Commercial Property Owners Policy Document:

“Infectious Diseases Clause

This Section is extended to include loss as directly resulting from interruption of or

interference with the Business carried on by You at the Premises in consequence of…

b) an outbreak of a Notifiable Disease within 25 miles of the Premises”.

Following its assessment, the Provider declined the Complainant’s claim.

- 2 -

/Cont’d…

The Complainant’s Representative emailed a complaint to the Provider on 10 May 2021 in

relation to the claim declinature and following its review, the Provider wrote to the

Representative on 19 July 2021 to advise that it was standing over its previous decision to

decline indemnity because the Complainant’s Tenant was not permitted to withhold rent,

as a result of an inability to trade as a public house and restaurant, due to the Government

restrictions.

The Complainant’s Representative sets out the Complainant’s complaint in the Complaint

Form, as follows:

“[The Complainant] owns a property on the outskirts of [location redacted] known as

[name redacted] bar and restaurant. Since June 2018 the premises has been rented

to [the tenant]. Due to the Government’s instructions in response to the outbreak of

COVID-19 [the tenant] were obliged to close [the bar and restaurant] on 16th March

2020. As such, [the tenant] considered that the lease was suspended and stopped

paying the rent …

The policy schedule confirms that in this particular case the Insured has this extension

insured up to a limit of indemnity of €23,000.00 so [the Complainant] notified the

claim to his insurers.

However, [the Provider] have declined the claim on the grounds that under the terms

of the lease the tenant remains obliged to continue paying rent despite being closed

due to the outbreak of a notifiable disease such as COVID-19. [The Provider] further

state that only in circumstances where there is physical damage or destruction to the

property following an insured event does the lease allow the suspension of the rent

…

In support of our argument to have this claim paid we wish to make the following

points:

1.0 Pages 10 and 11 of the lease deal with the issue of insurance. Section C 1.1

requires that the lessor insure the demised premises against damage by fire,

lightning, explosion, etc.... and such other perils as the Lessor may from time to time

reasonably decide. In this case [the Complainant] purchased the policy which is

written on an All Risks basis and included the Infectious Disease Clause extension…

So all matters insured against are effectively insured events as per the wording of the

lease.

If the policy fails to operate in cases such as these then in what circumstances would

the Notifiable Disease extension provide indemnity? - quite clearly it was designed

for situations such as this.

2.0 [The Provider] further argue that in order for the rent to be suspended there must

be damage or destruction to the Insured property by an insured risk (presumably [the

Provider] mean physical damage or destruction). Obviously while the outbreak of