AXA, one of the biggest insurance companies in the world, has agreed to pay COVID-related business interruption claims by a group of restaurants in Paris after a court ruled that the restaurants’ revenue losses resulting from COVID-19 and related government orders were covered under AXA’s policies.
AXA initially took the position that its insurance policies did not cover business interruption caused by COVID-19. The restaurant then sued AXA in a French court, seeking coverage for operating losses resulting from a government order issued in March mandating the closure of restaurants and bars in response to the COVID-19 pandemic. The court concluded that the government orders, which prohibited restaurants from receiving the public and offering traditional sit-down dining services, triggered the policy’s coverage for business interruption coverage. The court rejected AXA’s argument that the pandemic was uninsurable, and made clear that if AXA intended to exclude such a risk it should have done so expressly in its policy. The court also rejected AXA’s argument that there must be a prerequisite of an insured event for the application of the “administrative closure” provision, noting that no prerequisite was required by the policy. AXA’s argument that the government orders did not require the restaurant to be closed because the restaurant was authorized to maintain take-away services was also rejected. As a result, the court ruled in favor of the policyholders, holding that the business interruption loss resulting from the government orders qualified for insurance coverage.
Although AXA first signaled that it would appeal the ruling, it now has agreed to pay the claims involved in the lawsuit as well as other coronavirus claims involving similar policies, acknowledging that the insurance policy wording at issue is ambiguous. AXA’s admission that its policy is ambiguous is important as ambiguous policy language is generally construed in favor of coverage, AXA’s decision to pay is the correct one.
Policyholders in the United States have been advancing similar arguments premised on broad coverage grants and ambiguous policy language. The French court’s ruling, along with AXA’s admissions concerning the policy language, provides additional support for policyholders’ view that COVID-related losses can be covered under standard commercial property insurance policies.
The ruling should also serve as a reminder that a policyholder should not simply accept an insurer’s coverage denial without conducting a detailed analysis of its insurance program by experienced coverage counsel and forcefully pursuing rights and claims under insurance contracts.