The Federal Court of Justice, Germany’s highest court of civil and criminal jurisdiction, has issued its first ruling on whether a COVID-19 business related closure is insured under a stand-alone policy maintained by the owner.

The ruling on January 26,2022, followed two cases heard at the Higher Regional Court (OLG) of Karlsruhe last year that had delivered dissimilar outcomes and highlighted how different wording in the insurance policy conditions may be decisive in the applicability of business closure insurance in cases of Covid-19-related business closures.

The Plaintiff in the Federal Court of Justice ruling operated a restaurant in Schleswig-Holstein and held a business closure insurance policy with the defending insurance company.

Under the terms and conditions of the insurance policy, the Insurer is obligated to compensate the Plaintiff for loss of income up to a period of indemnity of 30 days in the event of a conditional business closure. In the Terms and Conditions, the covered lists of Diseases and Pathogens did not list COVID-19, SARS-CoV, or SARS-CoV-2.

After commencement of the policy, the state government ordered the closure of all restaurant establishments, with out-of-house sales permitted under certain conditions. The Plaintiff subsequently closed his restaurant and offered a delivery service.

The Plaintiff sued for a declaratory judgment that the Insurer is obligated to pay him compensation under this insurance due to the closure of his restaurant. The Plaintiff's claim was dismissed in the first instance and on appeal, against which he appealed to the Federal Court of Justice.

The Federal Court dismissed the appeal stating the Plaintiff was not entitled to any compensation of loss from the Insurer under the policy because a business closure in order to prevent the spread of the disease COVID-19 or the pathogen SARS-CoV-2 is not covered by the Terms and Conditions.

According to the ruling, the catalogue of diseases and pathogens covered by the policy is conclusive and COVID-19 and SARS-CoV-2 are not included. This interpretation would accord with the understanding of an average policyholder, which is decisive for the interpretation of the Terms and Conditions.

The court’s decision clarifies the question of whether insurance cover under a business closure insurance policy always requires an 'intrinsic risk'.

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