Insurance versus Corona - When does a shutdown insurance pay?

The corona crisis has reached a new dimension with the forced closure of many businesses. In this context the question arises as to whether insurance will cover the costs of the Corona crisis. In the first place, a so-called shutdown insurance may be considered. We will explain which risks are covered by such insurance.

1. Shutdown insurances

Shutdown insurances belong to the so-called loss of earnings insurances which offer protection in case of business interruptions. If operations are at a standstill, costs continue to arise because, among other things, rents, suppliers and staff have to be paid without any income being generated. These costs and the loss of profit are only partially covered by other insurance companies, so that loss of earnings policies can be taken out for this purpose. Such insurance covers the financial consequences of a shutdown or disrupted operation, for example after water damage or fire (fire operation interruption insurance). In the Corona crisis, special attention is paid to the shutdown insurance. Among other things, it protects companies if operations are interrupted for reasons of infection protection. A typical application for such a shutdown of operations is the discovery of salmonella at a food manufacturer or the closure of a care facility due to a multi-resistant infectious agent.

2. When does a shutdown insurance pay?

Companies affected by the measures to contain the coronavirus are now wondering whether a shutdown insurance policy would also cover the damage currently being caused in the fight against the corona pandemic.

As a matter of principle, a shutdown insurance pays in case of official measures on the basis of the Infection Protection Act. In the event of shutdown of operations, three preconditions must be met:

1. Shutdown of the insured operation,
2. on the basis of the Infection Protection Act,
3. due to the occurrence of a notifiable infectious agent.

3. Insurance coverage in the corona crisis?

Whether shutdown insurances in the current corona crisis are liable to payment must be checked individually for each insurance contract. It is true that the three conditions mentioned above all seem to be fulfilled: the current legal regulations force many businesses (such as cultural institutions, catering and retail businesses) to shut down (1). It is also a measure based on the Infection Protection Act (2) because under the Infection Protection Act the state governments are empowered to issue ordinances to combat communicable diseases (section 32 of the Infection Protection Act). Furthermore, the coronavirus is also a notifiable infectious agent (3). But the devil is in the details: Insurance cover is often not provided because the insurance policy does not cover every infectious agent that must be notified.

The insurance conditions usually contain a list of specified diseases and pathogenic agents. In all probability, the new coronavirus (2019-nCoV) will not be included in this list as it has only been known for a short time. Whether the insurance cover applies only to the diseases and infectious agents mentioned in the list or also to new diseases and pathogens must be analysed individually. For this purpose, the often different formulations of the insurance conditions must be examined closely. In some cases, the insurance only covers the diseases and pathogenic agents listed in the insurance conditions. In other cases, however, a reference to the Infection Protection Act is reasonable if the list of insurance conditions refers to the Infection Protection Act. Often it then corresponds to the version of the Infection Protection Act (section 6 and section 7) which was valid at the time of the conclusion of the contract. In these cases it depends on whether the insurance contracts contain a dynamic reference to the Infection Protection Act. Only then does the insurance cover extend to all notifiable diseases and infectious agents. This decision must be made individually for each policy.

If insurance cover exists in principle, the insurance has to be taken out only if the policyholders have fulfilled their duties of cooperation and their obligations. The insurance cover may no longer apply if the policyholder does not show proper conduct after the occurrence of an insured event and informs the insurer too late.

We therefore recommend taking a look at your insurance conditions. Please feel free to contact us.

Dr Philipp Sahm

(Lawyer)