Insurer ordered to pay compensation for losses suffered during the state of alarm

Self-employed workers or businesses that were required to close by order of the health authorities should start reviewing their policies to check whether they include coverage for “suspension of activity” or “loss of profits.”

Indeed, the Provincial Court (Audiencia Provincial) of Girona recently ruled that an insurer must pay €6,000 to a self-employed worker who, like thousands of other businesses, had to close during the state of alarm declared in March. This business had taken out a policy that provided coverage during a “suspension of activity.”

The judgment paves the way for more self-employed workers to bring claims

Section One (Sección Primera) of the Provincial Court of Girona has held in its recent judgment SAP 59/2021, of February 3, that the loss of profits resulting from the suspension of activity of a restaurant business, as a consequence of the state legislation enacted in response to the COVID-19 pandemic, is indeed covered under the specific insurance policy examined.

The question to be resolved is essentially a legal one and consists of determining whether or not the suspension of a restaurant business as a consequence of the state legislation enacted in response to the COVID-19 pandemic is covered under the specific insurance policy examined.

“Everything that is not expressly excluded is included”

In this regard, the owner of the pizzeria had taken out a policy with the insurer on February 13, 2020, that is, one month before the state of alarm, which provided for various contingencies to be met. Among them, there was a special section on “suspension of activity.” Having had to close the business for longer than the period provided for in the contract (30 days), the businesswoman decided to claim the amount agreed in the policy. However, the insurer refused to pay the €6,000, on the grounds that the exceptional circumstances of a pandemic did not fall within the coverage.

The insurer argued that nowhere in the policy taken out, whether in the general or the particular conditions, was it stated that “the expenses of a suspension arising from a government decision in response to a pandemic are covered (as if this were one of the insured events that both parties intended to insure).”

The Provincial Court of Girona replied that, “in any event, the insured’s business is interrupted and its income reduced, and precisely for that reason, where the general conditions do not expressly provide for the heading ‘suspension by government decision in response to a pandemic,’ and the insurer raises this against the insured, we are faced with a clear limitation of the insured’s rights in a standard-form contract (contrato de adhesión),” as stated in the judgment.

A very common type of coverage in multi-risk policies

This coverage is extremely common in multi-risk policies, which small businesses usually take out. Those who have it, as will be the case in many instances, should review the conditions and, above all, check whether force majeure events arising from the Government decree are excluded from compensation.

In many cases, legal costs will have to be paid in order to obtain compensation

Even if entitled to compensation, a self-employed worker who claims more than €2,000 should be aware, on the one hand, that the insurer will most likely invoke force majeure and that he or she will have to go to court to receive the money owed.