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In five decisions, rendered on September 17, 2020 , the Paris Commercial Court ordered the insurance company AXA to compensate several restaurateurs for their operating losses resulting from their administrative closure.
AXA’s refusal to compensate restaurant owners for operating losses
AXA refused any compensation, like many other insurers.
For the layman, reading the contracts can be perplexing and of course AXA refused to guarantee the loss by using an exclusion clause.
The judges were not mistaken and agreed with the restorers.
These decisions show that we were right to assign insurers and that companies must not give up this fight.
As specialist lawyers, we suggest that you study your insurance contracts to indicate whether the cases will be able to prosper in court.
Regarding the cases judged in September 2020, the contracts mentioned that the operating losses following the administrative closure are covered.
Analysis of insurance contracts and legal proceedings
However, since March 15, 2020, in application of the decree of March 14, 2020 carrying various measures relating to the fight against the spread of the covid-19 virus, restaurateurs were forced to close their establishments to the public.
The special conditions of the AXA France IARD Professional Multi-risk insurance contracts included an extension of cover for “operating loss following administrative closure” worded as follows:
“The cover is extended to operating losses resulting from the total or partial temporary closure of the insured establishment, when the following two conditions are met:
1. The decision to close was taken by a competent administrative authority, external to the insured
2. The decision to close is the consequence of a contagious disease, a
murder, suicide, epidemic or poisoning. »
It should be noted here that the epidemic is defined, in the dictionary of the Academy
French, as follows:
“Appearance and spread of a contagious disease which affects both, in a given region, a large number of individuals and, by metonymy, this disease itself. »
The ministerial decree of March 14, 2020 ordering the closure of “places open to the public that are not essential to the life of the Nation” was taken as part of the fight against the spread of the covid 19 virus.
Court decision: nullity of the exclusion clause of AXA
The spread of the covid 19 virus, given its speed and development within the population, but also the measures taken to combat this spread, undoubtedly falls within the definition of an epidemic.
Therefore, the closure decision imposed on French companies was indeed the consequence of an epidemic.
In an attempt to avoid its obligations, the insurance company AXA France IARD took advantage of a contractual exclusion clause which would be applicable to the risk of epidemics.
To be enforceable, such a clause must be drafted in clear and precise terms that do not call for ambiguity.
In addition, the exclusion clause must be limited, which means that it must circumscribe the guaranteed risk and not be general.
However, in this case, the disputed clause was neither formal nor limited since it was neither clear nor precise and it was general.
Worse still, the interpretation that AXA FRANCE IARD intended to make voided the guarantee granted of its substance.
Indeed, the warranty exclusion invoked by AXA FRANCE IARD was worded as follows:
– Operating losses, when, on the date of the closure decision, at least one other establishment, whatever its nature and activity, is subject, on the same departmental territory as that of the insured establishment, an administrative measure of closure, for the same reason. »
According to AXA FRANCE IARD, this exclusion clause was applicable to the epidemic risk.
This interpretation would have had the effect of emptying the subscribed guarantee of its substance and would therefore have the effect of neutralizing the disputed clause.
However, under the terms of Article L.113-1 of the Insurance Code, the Court of Cassation rules out the validity of exclusion clauses which have the effect of depriving its validity of guarantee:
“In deciding thus, without examining whether the exclusion provided for in the general conditions of the contract did not deprive of all purpose the professional civil liability cover taken out by (the repairer) for his activity of “repair at home or at the address of the risk,
troubleshooting of construction machinery and agricultural machinery”, the Court of Appeal deprived of its decision of legal basis with regard to Article L. 113-1 of the Insurance Code. ”
(2nd civ., March 20, 2008, n°06-11763)
The same solution was rendered when the exclusion clause emptied the warranty extension of its substance:
“That by so ruling, while the stipulated exclusion emptied the extended warranty of its substance, the Court of Appeal violated the said text”
(2nd civ., 9 February 2012, n°10-31057)
In this case, AXA FRANCE IARD argued that the hypothesis of operating losses following an administrative closure due to an epidemic would be excluded if the closure concerned other “establishments” on the departmental territory. .
But the risk of an epidemic, by nature, concerns a given region and a large number of individuals, and cannot therefore be covered by excluding cases where this epidemic would affect another “establishment” in the same city.
To be qualified as such, the epidemic must spread rapidly and affect a large population over a large territory, which therefore necessarily exceeds the people present in a single restaurant.
Therefore, it is totally impossible and fictitious to envisage that in an epidemic context, a single “establishment” over the whole of a department can be subject to administrative closure.
The insurer cannot, on the one hand, undertake to guarantee operating losses resulting from a decision to close following an epidemic and, on the other hand, apply an exclusion which has the effect of systematically depriving application of this same guarantee.
The exclusion clause was therefore intended to apply only to reveal a breach
demonstrates principles of good faith and consistency on the part of insurers.
It is in this sense that the Paris Commercial Court ruled, in five judgments on the merits dated September 17, 2020:
“Whereas this policy is an adhesion contract of which the defendant is the drafter and solely responsible for the wording and the guarantees offered; that he obviously chose to compensate for the loss of business following an administrative closure in the event of an epidemic which, by definition, is very unlikely to concern a single establishment in the same territory; that the warranty exclusion clause (…) makes the warranty ineffective in this case, that it thus empties the granted warranty of its content,
The court says … that the defendant shall indemnify the insured against interruption of business. »
(Paris Commercial Court, 09/17/2020, n° 2020022816, 2020022819, 2020022823, 2020022825 and 2020022826)