13. Dec 21

COVID-19 – Liability of business closure insurance providers depends on the individual case

Whether a provider of business closure insurance is liable to pay out in response to a closure related to COVID-19 depends largely on the specific wording of the insurance conditions.

A large of number of stores were forced to close during the coronavirus lockdown. Although it remains a matter of legal dispute whether a provider of business closure insurance is required to pay out if a business is forced to close by the authorities, we at the commercial law firm MTR Rechtsanwälte can report that it is becoming increasingly apparent that the issue of liability turns on the specific wording in the insurance conditions.

In its ruling of June 30, 2021, the Oberlandesgericht (OLG) Karlsruhe – the Higher Regional Court of Karlsruhe – found an insurer liable to pay out (ref.: 12 U 4/21). In the case in question, the operator of a hotel with an associated restaurant had taken out business closure insurance in January 2020. The terms and conditions of the insurance policy stated that insurance cover was provided in the event of an outbreak of notifiable diseases or pathogens if these were listed in the German Act concerning the Prevention and Control of Infectious Diseases (Infektionsschutzgesetz, IfSG). At that time, this was not yet the case for COVID-19/SARS-CoV-2, and the insurer did not want to provide coverage.

However, the OLG Karlsruhe did not play along, noting that the insurance conditions repeatedly made reference to the IfSG. This was said to give the policyholder the impression that every business closure justified on the basis of the IfSG would be covered by the insurance, it not being clear to them that there are restrictions. A clause which limits insurance coverage to an exhaustive catalog of diseases and pathogens that falls short of the scope of the IfSG is not transparent for the policyholder and is therefore invalid according to the OLG Karlsruhe. The Court held that the policyholder did not realize that the catalog in the insurance conditions was already out of date. In addition, it noted that an obligation to report COVID-19 was already in place at the time when the policy was taken out.

The Oberlandesgericht (OLG) Celle – the Higher Regional Court of Celle – arrived at a different conclusion in its judgment of July 1, 2021 (ref.: 8 U 5/21). The case was concerned with a restaurateur who had been forced to close his restaurant due to the coronavirus. In the terms and conditions of his business closure insurance, the obligation to pay out was tied to the outbreak of diseases and pathogens named in the IfSG. At that time, COVID-19 was still unknown and not named. Finding that the list of diseases and pathogens in the insurance conditions was exhaustive, the OLG Celle ruled that the insurer was not liable to pay out and that the policyholder was not unreasonably disadvantaged as a result.

The Bundesgerichtshof (BGH) – Germany’s Federal Supreme Court – will probably have the last word on the liability of business closure insurance providers. The OLG Celle has granted leave to appeal to the BGH.

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