Business interruption: AXA XL sentenced


The Commercial Court of Lille has ordered Axa XL to compensate a major clothing retailer for business interruption. The judges validated an extended warranty clause, which is particularly common in the retail sector.

Nearly three years after the announcement of the first Covid 19 lockdown, the issue of business interruption compensation is still causing a stir among insurers.

On 24 November 2022, the Commercial Court of Lille ordered Axa XL, an American subsidiary of Axa, to compensate Promod.
Validation of the « Impossibility of access » clause

The women’s clothing retailer took legal action against its insurer after the latter refused to compensate them for business losses suffered during successive periods of lockdown. Axa XL argued, in particular, that the conditions for the application of the business interruption cover had not been met. In order to reject this argument, the judges conducted a two-stage reasoning : they first admitted that the conditions necessary for the mobilisation of the basic business interruption cover were not indeed met, since there was no material damage. However, the “impossibility of access” warranty extension signed between Promod and its insurer, which added an impossibility of access/administrative constraints warranty to the contract, was deemed valid by the court.

In other words, the business interruption cover taken out by Promod, thanks to the extended warranty, is not subject to the occurrence of material damage. “This extension of cover, which does not presuppose material damage, is similar to the one that pitted Kookaï against Allianz on 30 September 2021,” said Jérôme Goy, Promod’s lawyer in the case.

This conviction will allow Promod to obtain compensation of up to 5 million per claim, i.e. compensation for each brand affected, primarily Promod in France. “This extended warranty clause is a risk for insurance companies, especially as it is particularly widespread in the trade sectors and is the subject of many riders“, warns Jérôme Goy, before indicating that Axa XL has appealed against this judgment.