On 11 and 12 February 2026, Edwin Coe LLP represented a group of policyholders in the Supreme Court in an important appeal examining whether Furlough payments should be treated as a deductible saving when calculating business interruption insurance claims arising from the government measures taken in response to the Covid-19 pandemic.

The policyholders argued that Furlough payments should not be deducted as a saving from the amount payable by insurers. They advanced two main arguments in this regard.

The first argument was that wage costs did not “cease” and were not “reduced” by the Furlough scheme (as was required by the wording of the savings clause in the insurance policy) because wage liabilities continued for the policyholders; they were just funded (in part) by the Furlough scheme.

The second argument was that, in any event, any saving was not “in consequence” of the insured peril (i.e. a case of Covid-19 within one-mile of the insured’s premises which causes action by the Government which in turn causes prevention or hindrance in the use of the insured’s premises or access thereto). This was because: (i) Furlough payments were collateral to and not legally caused by the insured peril; and (ii) the existence and proof of the insured peril was irrelevant to the policyholders’ entitlement to received Furlough payments. The policyholders argued that this latter point was supported by the Full Federal Court of Australia in LCA Marrickville Pty Limited v Swiss Re International SE [2022] FCAFC 17 in respect of JobKeeper payments (the Australian equivalent of the Furlough scheme).

Both Jacobs J at first instance and the Court of Appeal have already held that Furlough payments should be deducted as a saving. However, if the policyholders are successful in their claims, insurers could be liable to pay back an estimated £1billion of Furlough payments to policyholders. Judgment is due to be delivered by the Supreme Court in due course.

The appeal involved the two linked cases of Gatwick Investments Ltd and others v Liberty Mutual Insurance Europe SE and Bath Racecourse Co. Ltd and others v Liberty Mutual Insurance Europe SE and others. Edwin Coe LLP represented the Gatwick Investment Appellants in the appeal.

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