FRANCE – BI LOSSES AND COVID-19 : AXA IS TRYING TO PUT AN END TO THE LONG-RUNNING DISPUTE WITH ITS RESTAURANT CLIENTS
More than a year after the beginning of the health crisis, AXA is trying to get out of the legal battle in which it is embroiled against its clients, by means a €300 million settlement offer to 15,000 restaurant owners who took out its “standard policy” with extended coverage for business interruption losses linked to administrative closure in France. This policy contains an exclusion clause, which has given rise to a legal debate widely commented on by the media in France for over a year.
A long tug of war between AXA and its clients
Axa has been in the crosshairs of French restaurant owners for over a year, and has seen a number of lawsuits brought against it by hotel and restaurant owners who have not been indemnified for business interruption losses arising from the pandemic. Taken to task in spring 2020 by Stéphane Manigold, a famous French restaurant owner, AXA acknowledged that some contracts were not clearly worded and agreed to settle with some insureds. However, AXA was determined to defend one of its other policies covering some 15,000 restaurant owners, excluding coverage for losses when at least two establishments based in the same department are subject to administrative closure for the same reason. Therefore, the judges of the merits were seized to decide on the validity of the contractual clauses of the contract sold by AXA. As a result, since the summer of 2020, decisions have been handed down by several courts of first instance, often diverging from one another. These decisions have all been appealed, highlighting the extent of the tug of war between French policyholders and insurers.
A legal marathon between AXA and the policyholders ensued, and various decisions were handed down by several Courts of appeal, sometimes in favour of the insurer, sometimes against it. Indeed, after a first widely commented decision favourable to policyholders, issued on 25 February, another chamber of the same Court of Appeal of Aix-en-Provence ruled on 20 May 2021 in three cases concerning three restaurant owners. All three decisions were favourable to policyholders. Axa commented on these decisions by stating that it was awaiting the outcome of other decisions, as this contract was still being debated before several other Courts of appeal. Axa was far-sighted in making this announcement as more recently, in a ruling handed down on 7 June 2021, the Bordeaux Court of Appeal agreed with the insurer, considering that the insurance policy should not respond.
A “coup de theatre” to end a long legal battle
Each side having won its case before the judges, AXA then seized the opportunity and decided on June 10th to make an offer of 300 million euros to 15,000 clients “who wish to receive a fixed and definitive indemnity”, the company says. The proposed settlement indemnity is intended to cover an amount equivalent to 15% of the turnover of catering activity, over the periods covered by the administrative measures precluding admission of the public, announced on 14 March 2020 and 29 October 2020, and subject to duration and amount limits provided for by the contract.
The settlement offer is expected to be open from 21 June until 30 September 2021, with clients invited to liaise with their usual AXA representative.
“AXA has played its role and acted in a responsible manner during the pandemic, supporting hundreds of thousands of customers, and making a significant contribution to the financing of the economic recovery. We regret the misunderstandings with some of our restaurant clients, especially given this sector was particularly hard hit during the sanitary crisis.” said Patrick Cohen, Chief Executive Officer (CEO) of AXA France.
“This amount is equivalent on average to 50% of the restaurant owners’ BI loss over the lockdowns period”. It should be noted that this financial proposal concerns all Axa France clients who hold a standard policy including an extension for BI losses following an administrative closure, “whether or not they have issued legal proceedings, whether or not they are still clients, and whether or not they have already benefited from solidarity aid from our company”, emphasises Patrick Cohen.
Insurance intermediaries little affected by this long legal battle
This proposal should have little impact on claims against insurance intermediaries, which remain generally rare in France. Indeed, the problem arising from the above-mentioned litigation between AXA and its clients is essentially centred on the interpretation of an exclusion clause and therefore cannot reasonably be linked to a breach of the intermediaries’ duty to advise its clients.
This trend can be confirmed in figures, as French intermediaries would be sued in less than 10% of the cases only. Prior to today’s announcement, some policyholders were sometimes tempted to sue their insurance intermediary in order to maximise their chances of obtaining indemnity, arguing that the intermediary should have advised them to take out business interruption cover, or more extensive BI cover. However, judges systematically reject claims against insurance intermediaries whose liability is indirectly affected by litigation between the insurer and dissatisfied customers.