Business interruption: insurers under pressure!
A few weeks before the expiration of the two-year statute of limitation on business interruption coverage, this sensitive issue is coming back into the legal arena. The consequences for the insurers concerned could be massive.
On September 28, 2021, the Court of Appeal of Angers pronounced a decision that has already started to set a precedent. The disputed contract is an “All Risks Except” contract, underwritten by MMA IARD through the broker Acmans (not involved).
The pandemic recognized as insured damage
However, as Jérôme Goy, partner at Enthémis, points out, “this appeal decision is the first to deal with the principal guarantees of the contracts applied to Covid. By its reasoning, it allows a greater number of “All Risks Except” contracts to apply. And this without any question of extension – in short, without this business interruption necessarily being “without damage”.
Indeed, as Jérôme Goy explains, “this decision recognizes the existence of damage to the clientele due to the pandemic: it also emphasizes that the pandemic is an insured damage, even in the absence of administrative closure”. To quote the grounds of the decision: “It is undeniable that the Covid-19 pandemic caused a major slowdown in the entire economy due to the widespread lockdown of the population and the closure of all non-essential businesses as well as of a large number of places open to the public. Therefore, to assert, as the MMAs do, that the decline in sales observed by the plaintiff company was not caused by an event affecting the company but by the economic crisis linked to the Covid-19 pandemic is an irrelevant distinction.”
An evolving case law
Until now, this reasoning had not been followed by the commercial courts called to rule. However, it has already been emulated: a judgment of the Commercial Court of Brest of December 17, 2021 (concerning a case in which Enthémis intervened) goes in the same direction, specifying that beyond the notion of “clientele”, the going concern is considered as an insured asset. “This ruling adds that the administrative closure texts “alter, or even destroy, the clientele”, which leads to the application of the main guarantee of the insurance contract”, says Jérôme Goy.
As the end of the two-year statute of limitation approaches, this change in jurisprudence (contested by MMA in the case of the Angers Court of Appeal’s decision) could have serious consequences for three reasons: a greater number of applicable guarantees, longer indemnification periods, and much larger amounts at stake. “The provisions already made by insurers may not be sufficient,” concludes Jérôme Goy.