The Central Bank said it expects insurance companies to pay the "reasonable" legal costs of test cases in disputes on business interruption insurance. 

The direction is contained in a Supervisory Framework published today by the bank. Covid-19 has prompted several businesses to claim on business interruption policies.

The framework, according to the financial authority, is intended to provide clarity for business.

There have been several disputes between companies with business interruption policies and their insurers, prompted by the impact of Covid-19. 

A case taken by three pubs against its insurer FBD is due before the Commercial Court in October. Last month, FBD set aside €30m as a "precautionary reserve". At the time, the company maintained that its policies do not provide cover for a pandemic. 

In a statement today the insurer said it it was committed to paying the reasonable legal costs of the FBD policy-holders involved in the ongoing test case.

It said it believed the cases before the courts would "resolve any uncertainty in respect of our public house policies. 

"The court process is the fairest forum to reach a resolution in this matter," it said. "It has always been our stated intention to work in a collaborative manner to ensure that this process is carried out as efficiently and fairly as possible for all parties."

The Central Bank today repeated its position that some policies do provide cover in circumstances related to Covid-19 and other policies clearly do not. 

It also says that, in some cases, the position is unclear. However it clearly states that it expects insurance companies to "honour valid claims in full and pay them promptly."