Scope of Business Closure Insurance: Decision of the Düsseldorf Regional Court
With the judgment of February 26, 2021 (Case No. 40 O 53/20), the Düsseldorf Regional Court made a decision that is of far-reaching importance for the interpretation of business closure insurance in connection with pandemic-related business closures. In the specific case, a Düsseldorf bar owner was awarded a compensation claim after the business was temporarily closed by the authorities as part of measures to contain COVID-19. The decision reflects the significant uncertainties that both policyholders and insurers faced during the pandemic.
Background: Cause and Subject of the Legal Dispute
The subject of the proceedings was the question of whether business closure insurance is liable for damages resulting from officially ordered closures in the context of a pandemic. The plaintiff, owner of a bar in Düsseldorf, had taken out corresponding insurance. Due to the North Rhine-Westphalia Corona Protection Ordinance, the business remained closed for several weeks, resulting in significant turnover losses for the operator.
The insurer argued that the insured diseases and pathogens were conclusively listed in the contract. Since COVID-19 was not explicitly listed at the time of the insurance event, a claim must be excluded. The insurance law issue therefore focused on the interpretation of the contractual terms regarding the coverage for new, not explicitly mentioned diseases.
Key Considerations of the Regional Court
Contract Interpretation and Transparency Requirement
In its decision, the Düsseldorf Regional Court primarily relied on the transparency requirement according to § 307 para. 1 sentence 2 of the German Civil Code (BGB). It examined whether the insurance terms were sufficiently clear and understandable for the average policyholder. In the court’s assessment, the relevant clauses did not contain a concluding enumeration but rather referred dynamically to the current version of the Infection Protection Act.
This meant in the specific case that even novel diseases, unknown at the time of contract conclusion, are covered by the insurance if they are considered reportable under the Infection Protection Act at the time of the official measure.
Obligation to Pay in the Event of an Ordered Closure
The judges further explained that for the occurrence of the insured event, it is not necessary to prove an infection in the business itself. A general administrative order suffices, extending to the specific company and based directly on a disease named in the Infection Protection Act.
The justification for the obligation to pay therefore significantly depends on the wording and systematics of the insurance terms. In the present case, this led to the bar owner being entitled to compensation for the claimed damages. The insurer was ordered to pay.
Impact on Practice and Follow-up Questions
Importance for Policyholders and Insurers
The judgment of the Düsseldorf Regional Court illustrates the essential nature of precisely and currently designed insurance terms. Companies wishing to protect themselves against risks of business closures rely on comprehensive and transparently regulated insurance coverage. Similarly, the judgment highlights the risks insurers face regarding dynamically formulated contract clauses.
The decision is exemplary for numerous proceedings in Germany where businesses have taken pandemic-related closures as an occasion to claim compensation from existing policies. It confirms that even so-called “novel” threat situations – if subsequently covered by the Infection Protection Act – may be included in the insurance coverage.
Limits and Open Legal Questions
When assessing insurance terms, individual contract wording and the design of reference norms are always crucial. Different formulations in other policies or future legislative changes can lead to different outcomes. The legal situation remains dynamic, especially since higher court clarifications are still pending and the Federal Court of Justice has not yet made a final leading decision on the main contentious issues.
It should also be noted that appeals could be filed against the judgment. It remains to be seen how higher courts will evaluate similar circumstances. Until a final, high court ruling is made, comparable disputes are always subject to the individual circumstances of each case (see Düsseldorf Regional Court, judgment of 26.02.2021, Case No. 40 O 53/20; presumption of innocence and ongoing proceedings reserved).
Assessment and Outlook
The judgment of the Düsseldorf Regional Court contributes to further clarifying the scope of business closure insurance in exceptional situations. It particularly emphasizes the importance of the transparency requirement and bases it on a dynamic interpretation in light of the Infection Protection Act. This gives the case significant signaling effect for contract interpretation in the insurance industry.
Companies, insurers, and investors alike are confronted with increased uncertainties as numerous detailed questions regarding contract and process design remain unanswered. Especially in conjunction with publicly impactful individual cases and subsequent legal changes, careful legal assessment is indispensable.
For further legal questions related to business risks, insurance, and corporate risk management, MTR Legal offers comprehensive and individually tailored support. If you are interested in in-depth legal advice in commercial law, you can find more information atLegal Advice in Commercial Lawfor further information.
