Special report on local developments in insurance law addressing claims arising from Covid-19
Macchi di Cellere Gangemi, Milan
This year’s IBA Insurance Committee report focuses on the way the insurance sector has dealt with claims arising from damage caused by Covid-19, with reference to the damage caused by the forced business closure and the stay-at-home orders issued by the various governments. In every jurisdiction, insurance companies have approached the matter in different ways, although some common features can be identified. Responses to our survey on the insurance dispute on claims arising from Covid-19 were submitted to the IBA Insurance Committee members from 19 different jurisdictions, both common and civil law.
First of all, the survey went through the different definitions (where available) of terms such as ‘event’, ‘occurrence’, ‘damage’ etc. Very few jurisdictions provided legislative definitions of these terms and rather relied on the definitions contained in the insurance policies.
Furthermore, the survey focused on the classification given to Covid-19 by the courts – and in the light of a general lack of relevant court decisions – in the insurance claim disputes and in particular on whether Covid-19, or losses arising from Covid-19, was/were classified in the relevant courts of the involved jurisdictions as:
- cause of insured loss;
- covered event;
- (losses arising from Covid-19 as) property damage;
- force majeure or natural peril.
The results of this survey and the interpretation of Covid-19 (and losses arising from Covid-19) are different among the 19 jurisdictions involved. In many cases the results are not homogenous in the same jurisdiction.
However, some commonalities can be found, in particular, as to whether Covid-19 can be classified as a cause of insured loss. Among the jurisdictions involved there have been many different approaches and there is no consistency on the matter in the court decisions of the various jurisdictions which took part in the survey. In general, in each jurisdiction the court relied on the wording of the policy with some particular approaches: courts in Germany have considered Covid-19 as insured losses based on the static/dynamic reference made to the German Infection Protection Act; courts in United Kingdom have adopted an approach based on the concurrent cause of the losses and of the geographic limit (such geographic limit has been applied also in South Africa, the so called ‘prescribed radius’); in the United States, due to the lack of physical damage to the property,Covid-19 has not been considered as cause of insured loss.
Moreover, as per the qualification of the losses arising from Covid-19 as property damage, the courts in all the jurisdictions involved in the survey, relied on the wording of the policies and did not consider losses arising from Covid-19 as property damage. Among the different approaches: in Germany, there is coverage only when the damage is caused by the insured peril; in France, courts ruled that Covid-19 (and the impossibility to access the premises) cannot be considered property damage when there is a lack of material damage to the insured goods: in the US, the court ruled for the exclusion of the coverage lacking any physical loss or damage to the property.
Regarding the qualification of Covid-19 as force majeure, there is uniformity among the jurisdictions, on whether Covid-19 can be considered as force majeure: in particular, Covid-19 has been considered as a visa major (force majeure) in India, the Netherlands and South Africa. In France, for instance, while Covid-19 is in general considered as force majeure, monetary obligations cannot be affected by force majeure events, as such obligations are never entirely impossible in terms of performance. In Singapore, in order to discharge the parties from the obligations, the force majeure events have to be such to radically modify what the parties agreed upon.
It is our hope that this survey will provide insurers, intermediaries, advisors and other insurance parties a preliminary but substantial view on the rules applicable around a significant number of jurisdictions around the world.
I would like to thank all the contributors who over several months devoted a significant amount of their time to this project and without their contributions this project could never have been realised. A special thanks to Qian (Sheila) Shen, Holland & Knight, officer and newsletter editor of the IBA Insurance Committee, and Camilla Søbjerg Nielsen, Bech-Bruun Lawfirm P/S, senior associate, who have helped greatly to complete this project.
Senior Vice-Chair, IBA Insurance Committee