Gatwick Investment and Bath Racecourse Co v Liberty Mutual Insurance Europe [2026] UKSC 14

Why It Matters

The decision narrows insurers’ exposure to pandemic business‑interruption claims and gives firms clear guidance on how government relief reduces indemnifiable losses, influencing future policy drafting and claim assessments.

Key Takeaways

• Supreme Court upholds insurers' right to deduct furlough payments.
• Savings clauses interpreted based on economic effect, not legal mechanics.
• Furlough payments considered causal losses, not gratuitous benefits.
• Court rejects 'but‑for' test, adopts approximate causation for indemnity.
• Decision clarifies insurance payouts for pandemic‑related business interruptions.

Summary

The Supreme Court delivered its judgment in Gatwick Investment and Bath Racecourse Co v Liberty Mutual Insurance Europe, tackling whether standard savings clauses in business interruption policies require insurers to deduct UK government furlough payments received under the Coronavirus Job Retention Scheme.

The justices favored the insurers’ construction, reasoning that a reasonable person would view any reimbursement—whether directly paid or funded by a third party—as an economic reduction of expense. They rejected the policy‑holders’ arguments on both the contractual construction and causation, applying the approximate‑causation test established in the FCA test case rather than a strict “but‑for” analysis.

Lord Leggatt emphasized that furlough payments are a legal entitlement, not a voluntary or benevolent grant, and therefore diminish the loss for which the insurer must indemnify. The court also noted that the purpose of savings clauses is to prevent over‑indemnification, and the insurers’ interpretation best serves that commercial objective.

The ruling limits the amount recoverable from insurers on pandemic‑related business interruption claims, requiring policy‑holders to account for government‑provided furlough relief. It provides clear precedent for interpreting savings clauses in future coverage disputes, shaping both insurer liability calculations and corporate risk‑management strategies.

Original Description

Gatwick Investment Ltd and others (Appellants) v Liberty Mutual Insurance Europe SE (Respondent)

Case ID: UKSC/2025/0067

https://www.supremecourt.uk/cases/uksc-2025-0067.html

Bath Racecourse Company Ltd and others (Appellants) v Liberty Mutual Insurance Europe SE and others (Respondents)

Case ID: UKSC/2025/0068

https://www.supremecourt.uk/cases/uksc-2025-0068.html

Judgment date: 22 April 2026

Neutral citation: [2026] UKSC 14

Issue:

Do 'furlough' payments paid by the UK Government under the Coronavirus Job Retention Scheme (“CJRS”) to policyholders fall to be deducted from the amounts otherwise payable by insurers in claims for "business interruption" losses suffered because of the Covid-19 pandemic?

Facts:

These appeals concern business interruption insurance claims arising out of the Covid-19 pandemic. Certain insurance policies provide explicit cover for losses resulting from interruption with the policyholder's business at their premises which arise in consequence of Government actions responding to certain insured perils. Covid-19 may be such an insured peril.

The policies in these appeals contain "savings" clauses which provide for a deduction from the amount payable by the insurers if “any of the charges or expenses” of the policyholder “cease or reduce in consequence of the Damage” (or words to similar effect). These appeals concern the correct construction of such clauses.

As part of the Government’s response to the Covid-19 pandemic, it established the CJRS. Under this scheme, employers who had “furloughed” their employees by instructing them to cease work could claim payments reimbursing the employers for their expenditure on the employees’ wages.

Each of the appellants is a company which was insured under an insurance policy with the respondent insurers. The first appellants are six companies, each of which owns or operates a separate hotel in England. The second appellants are various insured companies within the Arena Racing group, who operate racecourses and greyhound racing tracks, among other things, in England and Wales. Each appellant successfully claimed payments under the CJRS after furloughing their employees by instructing them to cease work.

The appellants claimed business interruption losses sustained during the Covid-19 pandemic under their insurance policies with the respondents. The respondents accept that they are in principle liable in accordance with the policies for such losses but argue that the payments received by the appellants under the CJRS should be deducted from the sum payable under the savings clauses in the insurance policies.

In the High Court, Jacobs J found that credit should be given for the CJRS payments. The Court of Appeal agreed with that conclusion. The Appellants now appeal to the Supreme Court.

Judgment:

The Supreme Court unanimously dismisses the appeal.

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