Non-damage business interruption (pandemic)
Business interruption losses suffered without any physical damage to the business, through administrative closure or denial of access, whose coverage led to massive litigation after the 2020 pandemic.
Standard business interruption cover requires insured physical damage to the insured's property, fire or water damage, that interrupts activity. Some policies, however, extend it to events without damage: administrative closure, a notifiable disease within a given radius, denial of access ordered by an authority. The Covid-19 pandemic turned these extensions, often written for local events, into global exposures, since thousands of businesses were closed at the same time by public decision. Litigation concerned the meaning of the clauses, causation between the disease and the loss, and the validity of exclusions. In the United Kingdom, the regulator brought a test case to settle the common questions at once; in France, disputes were decided contract by contract. Since then, markets expressly exclude communicable diseases, and pandemic risk is considered uninsurable without public intervention.
On January 15, 2021, the UK Supreme Court ruled largely in favor of policyholders in the test case brought by the FCA on sample wordings from several insurers, affecting about 370,000 businesses; in France, the Court of Cassation upheld on December 1, 2022 the exclusion AXA had invoked against restaurant owners.
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