COVID 19 pandemic: No insurance cover for loss of earnings

In its ruling of 5 January 2022(4A_330/2021), the Federal Supreme Court overturned a ruling of the Commercial Court of the Canton of Aargau and dismissed the action brought by an establishment (restaurant and bar) against an insurance company.


The respondent (catering company) asserted a claim for payment of CHF 40,000.00 for loss of earnings and additional costs as a result of the epidemic (with reservation of the right to sue subsequently). The respondent derived the claim from the business insurance SME with additional conditions concluded with the complainant (insurance company).

Adoption of the General Terms and Conditions

The additional conditions were undisputedly general terms and conditions, which is why the Federal Supreme Court examined in a first step whether they were part of the insurance contract. In the present case, there were no individual agreements and the additional conditions were adopted globally by the respondent.

One of the issues in dispute between the parties was whether pathogens for which the WHO pandemic levels 5 or 6 apply nationally or internationally (exclusion clause) are excluded from the insurance cover. The Federal Supreme Court is of the opinion that the fact that the definitions of the WHO pandemic levels were not included in the full text in the GTC does not harm the acceptance of the insurance exclusion. The definitions were available on the internet, which according to the Federal Supreme Court was compatible with the GTC accessibility rule. The fact that the definitions can only be accessed in English, although the insurance contract was written in German, does not harm an adoption. In the future, however, it would be advisable to at least include a reference to the website (see E. 4.1.2.).

The Federal Supreme Court examined under the unusualness rule whether the exclusion clause was objectively unusual, which would mean that it was not part of the contract. The Federal Supreme Court found that the exclusion clause was one of many provisions in the supplementary terms and conditions limiting the insurance benefit, which did not substantially change the character of the SME business insurance, nor did the exclusion clause fall outside the legal framework of the type of contract to a significant extent. As a result, the exclusion clause was not objectively unusual and thus part of the contract.

At most, the assessment would have been different if the insurance had been described as epidemic insurance and had also been advertised as such by the complainant (see E. 4.2.4.).

The Federal Supreme Court left open the question of whether and to what extent the transparency requirement applies to the examination of general terms and conditions.

Interpretation of the committee clause

In interpreting the GTC, the Federal Supreme Court came to the conclusion that the WHO pandemic levels 5 and 6 do not have to be “in force” or “authoritative”, e.g. by an authority relying on a WHO pandemic level. In the event of a contrary result, the exclusion clause would be a dead letter, because the WHO was already no longer practising the classification system when the contract was concluded.

The application of the ambiguity rule was denied by the Federal Supreme Court because it was only applied as a subsidiary rule if all other means of interpretation failed (E. 5.2.3.).

The parties already agreed in the proceedings before the Commercial Court that the Corona pandemic (COVID-19) fulfilled all the requirements of a level 6 pandemic according to the relevant WHO definition. Only the validity of the insurance exclusion was in dispute. Because the Federal Supreme Court came to the conclusion that the insurance exclusion was validly agreed, there was no insurance coverage for the claimed loss of earnings.

Conclusion

Even though there are, in my opinion, very good arguments for a contrary result, it is to be welcomed that there is now a ruling from the highest court in Switzerland, which creates legal certainty. Accordingly, the ruling is likely to have a major signal effect on pending proceedings and out-of-court negotiations, because there are similarly worded exclusion clauses in many insurance conditions.

We assume that the importance of general terms and conditions will increase in the future, because contracts (especially also in the digital world) are no longer negotiated individually, but are increasingly concluded through pre-formulated general terms and conditions. On the one hand, this development is likely to lead to increased efficiency, but it also carries the risk of worsening the position of the weaker party (e.g. consumers).

You can find the Federal Supreme Court’s media release here.


If you have any questions on the subject, please do not hesitate to contact Balthasar Wicki or Sebastian Wälti.

Contributing Advisors