Key Contact: Aisha Wardell
Gatwick Investment Ltd and others (Appellants) v Liberty Mutual Insurance Europe SE (Respondent); Bath Racecourse Company Ltd and others (Appellants) v Liberty Mutual Insurance Europe SE and others (Respondents).
On 22 April 2026, the long anticipated judgment from the Supreme Court in the case brought against Liberty Mutual Insurance Europe SE and others was handed down. The appeal addressed a narrow but financially significant issue for the Appellants, namely whether furlough payments received under the Coronavirus Job Retention Scheme (CJRS) should be deducted from insurance recoveries for pandemic-related losses. Finding in favour of Liberty Mutual, the Supreme Court dismissed the appeals, holding that furlough payments received under the CJRS must be deducted under standard 'savings' clauses when calculating business interruption indemnity for Covid-19 prevention of access claims.
The Claimants suffered substantial losses due to government restrictions during the Covid-19 pandemic. Like so many other businesses the Claimants made claims under their business interruption insurance policies and received governed support through the CJRS (which reimbursed a portion of employee wage costs).
Whilst the insurers accepted liability in principle, they argued that CJRS payment should reduce the indemnity payable, relying on the 'savings clauses' contained within the respective policies.
At the first instance in the High Court, it was held by Jacobs J that furlough payments should be deducted for the purposes of the indemnity payable. This was subsequently upheld by the Court of Appeal. The Supreme Court judgment affirms those previous decisions.
The question of whether furlough payments under the CJRS must be deducted from the indemnity otherwise payable under the business interruption policies turned on two questions of law:
- Whether reduced or avoided wage costs, funded by the government, constituted a 'saving' to be deducted.
- Whether such payments were collateral benefits (typically not deductible) or payments directly linked to the insured loss and therefore deductible.
Accepting the insurers' arguments, the Supreme Court held that CJRS payments resulted in wage costs ceasing or reducing and that such reductions were 'in consequence of' the insured peril i.e., the pandemic and related restrictions.
Whilst the policyholders argued that the CJRS payments were collateral benefits, the Supreme Court rejected this argument, instead determining that CJRS payments were not voluntary collateral benefits but targeted reimbursements of wage costs, directly linked to the financial consequences of the insured event. The payments from the CJRS were designed to subsidise employment costs during the pandemic and therefore replaced costs that would otherwise have been reduced. In doing so, the Supreme Court noted that the purpose of the savings clauses contained within the policies is to prevent policyholders from recovering in excess of the actual loss suffered as a result of the insured peril. Had the policyholders' arguments been allowed, this intention would have been defeated.
The Supreme Court decision is likely to have wide-ranging implications for policyholders, particularly in relation to the value of their claims. It is expected that the decision is worth approximately 1 billion pounds for the insurance market. However, the decision does provide clarity to one of the remaining unresolved issues relating to Covid-19 business interruption disputes.
