BUSINESS INTERRUPTION AND COVID-19 : A FRENCH COURT OF APPEAL RULES IN FAVOUR OF INSURERS, WHILE UK SUPREME COURT’S DECISION IS STILL EXPECTED

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.