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Business interruption: MMA insurer ordered to compensate for Covid-related loss of business
The French Supreme Court upheld a ruling by the Angers Court of Appeal, and ordered MMA to compensate an insured for damage to his clientele during the health crisis. The policy in question provided “all risks except” coverage.
Customer damage considered insurable
The ruling handed down by the French Supreme Court on November 9, confirming the decision of the Angers Court of Appeal of September 28, 2021, condemns the insurer MMA. It also recognizes the existence of damage to a company’s clientele due to the pandemic, considered insurable even in the absence of an administrative closure.
This time, the case involved not a restaurant owner, but an electric fence manufacturer. The latter had taken out an “all risks except” professional insurance policy with MMA, for its industrial activity. After a drop in sales in March and April 2020, which it attributed to the coronavirus health crisis and the ensuing containment measures, the company declared a claim on May 5, 2020 and requested “business interruption” coverage. This covered “damage, recourse, liability, costs and losses, whether or not consequential, suffered by all and any property originating from a non-excluded event”. Following its insurer’s refusal to provide cover, the company sued MMA to enforce the policy for business interruption. Condemned on appeal, MMA appealed to the French Supreme Court.
According to Jérôme Goy, a lawyer at the law firm Enthémis Avocats, there are two points to note in this ruling: firstly, it should be remembered that the insured company had been able to continue its industrial activity, since it had not been subject to an administrative closure. Secondly, it is important to remember that customers are considered as insurable intangible assets. “The Court of Appeal considered that the terms of the guaranteed contract provided that all assets, including intangible assets, were insured, in particular the clientele, and that the health crisis itself constituted damage to this clientele. The court went quite far in defining the damage, on the basis of a definition of the property insured under the contract,” he analyzes. The appeal judges could not have condemned the insurer without this prerequisite”.
An interlayer which benefits many companies
This reasoning was upheld by the French Supreme Court: “The Court of Appeal applied a sovereign interpretation, exclusive of any distortion, which the ambiguity of the terms of the disputed clauses made necessary, and ruled that business interruption not resulting from damage to the company’s property is covered, up to the contractual limit”. MMA, which was ordered to cover the insured company for 1 million euros, must therefore answer for its business interruption coverage.
“This decision confirms our analysis made since 2020, on behalf of policyholders. The Court of Cassation has ruled that the sovereign interpretation of the appeal judge, according to which ‘operating losses not resulting from damage to the company’s property are covered, up to the contractual ceiling’, does not result in a distortion of the contract, and therefore allows compensation to be paid,” comments Isabelle Monin-Lafin, a lawyer with the Astrée law firm, which is advising the broker who created the interlayer in this case, and defending several of the broker’s clients. In this case, we’re talking about an interlayer that benefits a large number of companies. As we have always maintained, policyholders can only be compensated following the Covid event when contracts provide for non-consecutive cover”.
For the time being, there is no general conclusion to be drawn from this ruling for all “all risks except” policies, moderates Jérôme Goy: “The Court of Appeal interpreted the terms of the contract, as is its role. The Cour de cassation verified that there was no misrepresentation, without making any interpretation. It merely confirmed the reasoning of the Court of Appeal, without drawing any general rule for all all-risks-except policies. This new judicial outcome in this case confirms the extension of the “all risks except” policy to cover operating losses linked to the health crisis. Contacted by L’Argus, MMA had not yet responded to our request at the time of writing.