As a result of the coronavirus pandemic, many customers have made claims for losses arising from the closure of their business under their BI insurance policies. Indeed, some policies offer cover for BI arising from infectious or notifiable diseases and non-damage denial of access and public authority closures or restrictions. In some cases, insurance companies have accepted to indemnify their clients, but others have refused to do so, leading to widespread concern about this lack of clarity in Europe. In this context, a French Court of Appeal ruled for the first time in favor of an Insurer last week, while UK Supreme Court’s decision is still expected.
FRANCE : FRENCH COURT OF APPEAL RULES FOR THE FIRST TIME ON COVID-19
This decision, delivered by the Court of Appeal of Aix-en-Provence on 3 December 2020, is in favor of the insurance company (AXA), whereas the jurisprudential line drawn by the lower courts on Business Interruption losses related to Covid-19 is not yet well established in France. Indeed, while some French courts of first instance ordered several insurers to indemnify policyholders’ Business Interruption losses ; others took the opposite position, making the situation somewhat complex.
In the abovementioned case, the Commercial Court of Marseille ruled on 23 July 2020 on the claim of a restaurant owner who was seeking to be indemnified for his BI losses following the closure of his establishment due to the pandemic. Axa was ordered to pay 66,385 euros to the latter, and appealed the decision. The Aix-en-Provence Court of Appeal reversed the order of the provisional relief judge, ruling in favour of Axa.
The Court of Appeal based its decision on two elements :
- it emphasized the absence of ambiguity in the exclusion clause. “The exclusion clause does not contain any term which could have a contrary meaning, […] it is unequivocally understood as excluding cover in cases where another establishment, whatever its activity, is subject to an administrative measure of closure in the same area, for the same reason as that which caused the closure of the insured establishment”.
- the Court of Appeal also considered that this claim exceeded the powers of the provisional relief judge : “the question whether or not an epidemic may or may not, by its very definition, lead to the administrative closure of a single establishment in a certain area […] does not fall within the powers of the provisional relief judge”.
The owner of the restaurant may take this case to the “Cour de Cassation”, the highest court in France.
UK : BUSINESS INTERRUPTION TEST CASE HEADS TO SUPREME COURT
In the UK, the High Court has delivered its judgment in the Financial Conduct Authority’s (FCA) test case over disputed UK Business Insurance coverage in light of the Covid-19 pandemic. The Court found in favour of the arguments raised by the FCA on most of the key issues. That’s the reason why most of the test case’s participants decided to file for an appeal. On 2 October, the High Court approved an appeal to be heard at the Supreme Court directly.
The appellant insurers were Arch Insurance (UK) Ltd, Argenta Syndicate Management Ltd, MS Amlin Underwriting Ltd, Hiscox Insurance Company Ltd, QBE UK Ltd, and Royal & Sun Alliance Insurance Plc (RSA). Ecclesiastical Insurance Office Plc and Zurich Insurance Plc did not participate in the ‘leapfrog’ appeal as the High Court’s September 15 judgement was to their favour.
To the latest news, the test will be put to rest in the coming weeks after appeal hearings were heard in the Supreme Court for four days until November 19. The regulator stated in its latest update : “Lord Reed recognised the importance of an early judgement for the businesses affected. He said that the Justices would do what they could to provide judgement as quickly as possible, but could not comment on whether that would be before Christmas or in January.”
The Supreme Court’s decision will affect around 700 types of policies and 400 000 policyholders, and will be crucial, as the Financial Ombudsman Service (FOS) and courts in Scotland and Northern Ireland are expected to use this judgment to rule on similar cases.
These two decisions are likely to have broad impact on future court rulings on this matter. They could also play a role in possible future liability claims brought against insurance intermediaries by their clients. Indeed, depending on the final outcome of these proceedings, number of policyholders will be tempted to sue their insurance broker, in order to obtain an indemnity when a policy wording does not provide cover or does not pay out enough. Nevertheless, it might be difficult for policyholders to prove that the broker acted negligently, as explained in our article INSURANCE BROKERS AND THE COVID-19 PANDEMIC : PROBABLE RISKS OF CLAIMS, BUT UNCERTAIN SUCCESS FOR POLICYHOLDERS — CGPA EUROPE