Hotel Multi-Risk Insurance and COVID-19 Business Interruption: The Insurer Is Prohibited from Distorting the Contract

A company operating a hotel had subscribed to a professional multi-risk insurance policy. Due to a prefectural order prohibiting tourist rentals in certain municipalities to prevent the spread of COVID-19, the establishment was compelled to close temporarily. The operating company then sought compensation for its business interruption loss, but the insurer refused, arguing that the relevant coverage was not expressly mentioned in the policy's special conditions.

The Court of Appeal of Pau dismissed the claim, holding that the coverage invoked was not included in the policy's special conditions. The company filed an appeal with the Court of Cassation.

The Court of Cassation quashed the appellate decision, holding that the court of appeal had distorted the insurance contract. The Court affirmed that coverage included in the general conditions of the policy, even if not specifically repeated in the special conditions, is enforceable against the insurer, unless there is an express clause to the contrary. In this case, the business interruption coverage for administrative closure due to disease or contagious infection was included in the general conditions and applied in the absence of a clear exclusion in the special conditions.

This decision thus reaffirms the principle that a judge may not distort the clear and precise terms of an insurance contract. It also emphasizes the importance for insurers of drafting their contracts transparently and of not excluding coverage set out in the general conditions without explicit mention in the special conditions.