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.