Corona crisis: when insurers have to pay in the pandemic

Insurance companies are happy to collect premiums but reluctant to pay in the event of a claim – a stereotype that numerous restaurants and businesses saw confirmed after the spring shutdown. Many companies, which are opposed to Business closures The companies that felt they were covered did not receive any money in the end. The Insurers found backdoors to refuse payment. This has triggered a wave of lawsuits, of which the first results can now be seen.

On Thursday, the Munich Regional Court announced a first interim status: Even if the pathogen Sars-CoV-2 is not explicitly mentioned in the contract, the insurers must pay in principle. On behalf of many other eateries, the Paulaner-Wirtshaus am Nockherberg in Munich, among others, had filed a lawsuit against the insurance market leader Allianz; according to legal experts, the innkeepers now have a good chance of winning in court. Final ruling still pending here.

Court: daycare center with emergency operations not entitled to insurance benefits

The judge spoke on Thursday at the same time a clear judgement in a parallel running procedure. A daycare center had also sued for insurance benefits. She did, however, offer emergency care during the shutdown. "The relevant policy terms, however, required a complete business closure for the insured event to occur," the court said. It has therefore dismissed the lawsuit.

However, the judge also emphasized that it still depends on the respective contract. The wording is different in each case, because neither customers nor providers have yet looked in detail at the pas to epidemics. "Until this spring, health risks ranked far down the list of specific fears," says George Abegg, Expert for insurance law at the law firm Rodl Partner. It wasn't until just before the lockdown that insurance customers looked at their policies: Am I insured against a business closure caused by an epidemic?

Corona crisis: widespread loss of revenue hardly seemed real for a long time

Insurers themselves have also included illnesses in the list of covered perils for years without charging a significant premium for them. Apparently they did not really expect significant payments.

Despite warnings of experts the danger of a surface covering loss of sales by an illness in Germany appeared evenly for a long time only little real. While insurers worked through the details of the consequences of climate change in the drought years, the pandemic scenarios there were still in the making.

A wave of lawsuits is rolling in on insurers

It will now be all the more expensive for the insurance industry. It had only factored in individual claims for illnesses, such as an occasional restaurant closure due to salmonella. Instead, she now sees a wave of claims rolling towards her. There are alone between 25.000 and 40.000 restaurants, cafes and hotels that have business lockdown insurance, estimates the Dehoga restaurant association.

If epidemics are covered, insurers must pay owners per diem for shutdown period. At least that was the hope of the innkeepers – all the greater was then the anger when the providers refused to compensate them. The court in Munich alone has already received 72 lawsuits for non-payment of shutdown insurance policies.

Insurers argue with cases of illness in the businesses

The dispute now also concerns which epidemics are covered under which circumstances. During the shutdown, the insurers argue that there were often no cases of illness in the business at all.

Some insurance policies also refer to Section 7 of the Protection Against Infection Act, which contains a long list of reportable diseases that qualify as causes of insured events. From anthrax to Ebola, plague and leprosy to the Zika virus, the horrors of mankind are listed here, but also everyday pathogens such as measles or the norovirus. However, the federal parliament did not add Sars-CoV-2 to the list until February.

This is now the source of contention in many cases. If an insurance policy refers to the law for covered illnesses – does the catch at the time the policy was written, the catch at the time of the business closure, or a later updated catch apply? When the contract was signed, Covid did not even exist yet. Some insurers are now insisting they don't have to pay for an illness not mentioned at the time.

However, the Regional Court of Mannheim has already ruled in April, such area-wide plant closures should be covered by insurance. This catching protects the rights of the insured and should generally prevail, demands expert Abegg.

Abegg advises taking a close look at existing business interruption insurance documents. If the type of business interruption covered is kept comparatively open, it tends to be a good insurance policy. "The reference to the Infection Protection Act also makes sense," says Abegg.

It would be best to make it clear that the law is meant in its current form. Less good policies contain explicit lists of insured risks. "If then the case that actually occurs is not in it, the insured has bad cards," says Abegg.

Business interruption insurance is part of property insurance, which is actually supposed to cover property damage. So these insurances are actually meant to step in when production facilities break down, for example due to flooding. This is another reason why many insurers find it difficult to regulate. Epidemics were originally an afterthought of the fire insurance industry. Here again they thought more cases like that of an ice cream parlor that has to close because of diarrhea.

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