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Business interruption: embarrassing rulings for insurers
Nearly two years after the outbreak of the Covid-19 crisis, insurers are still struggling with claims for business interruption suffered by companies due to the pandemic. Judges keep ruling in favor of insured companies, considering that they were covered against “business interruption” suffered as a result of the lockdowns.
In December, while a Parisian court ruled against Crédit Mutuel (which has appealed), the Commercial Court of Brest ruled against Allianz, agreeing with Le Duff group, known for its “Brioche Dorée” brand.
The group had asked its insurer to pay more than 20 million euros to compensate the losses suffered by its subsidiaries due to the lockdowns and restrictions imposed in 2020. The insurer refused to pay on the grounds that its guarantee only applied in the event of material damage to an insured asset, which in its view was not the case.
Beware of confusions
This point often comes up in discussions about “business interruption” coverage, which has been expensive for insurers, particularly for AXA. Insurers, backed by an analysis of the sector’s supervisor on this matter, have consistently stated that most of business interruption policies do not fall within the scope of Covid. Why not? Because most of these contracts were designed to intervene following material damage to property, for example in case of fire. This has led to animated legal debates on the notions of “insured property” and “material damage”.
In the case of Le Duff group, the judges considered that the going concern is legally an intangible asset, but it is insured, because it was not included in the exclusions of the contract. Moreover, this insured property has suffered material damage since the restrictions linked to Covid “alter or even destroy the clientele”. When it was contacted, Allianz had no comment. Neither did the Le Duff group.
This is an important judgment, according to the lawyer Jérôme Goy, who is defending the insured company. “I have several cases in which the going concern could be considered as an insured asset”, he argues. The analysis would be valid for contracts negotiated by brokers for several companies having the same profile. However, this would not apply to most other contracts. “In the general conditions of the insurers, the lists of insured goods are, in most cases, restrictive”, concedes the lawyer. The going concern cannot therefore be covered.
Drama for companies
Commercial courts have been overruled several times on appeal in business interruption matters. However, this is not the first time that judges have overturned an insurer’s claim that the Covid crisis could not constitute damage to the insured property.
In September, in a ruling highlighted by L’Argus de l’Assurance, the Court of Appeal of Angers ruled in favor of the agricultural equipment company Lacmé, against its insurer MMA (Covéa Group) on the grounds that ongoing concern, and particularly the clientele, were covered by the guarantee negotiated through a broker. “This is a remarkable judgment because it ends the debate on the nature of the property covered”, says the lawyer Isabelle Monin Lafin, who intervened in the case on the company’s side. She explains that it is a “case that applies to many French industrial companies” having used the same broker.
When it was contacted, the insurer confirmed having brought the case before the Court of Cassation. “It is not normal that two years after the beginning of the crisis we are obliged to go to the Court of Cassation to have the evident judged. It is a tragedy for companies, because many of them have not recovered from the crisis and some of them are in bankruptcy”, regrets Isabelle Monin Lafin.
Solenn Poullennec