The time is running out for those companies that want to sue the insurers who refuse to cover the damage caused by the first state of alarm. Spanish law states that there is a two-year limit for doing so, and given that the state of alarm was declared on March 14, 2020, there are just over two months left before it can be litigated. The insurer does not want to cover these costs, as has happened in many cases.
So far there are several people who have taken their claims to court and in the first instance there are rulings in every way: some give the reason to the client and others to the insurer. But in the second instance there are already two sentences in Spain, and in both cases they are in favor of the client. Both are from the Provincial Court of Girona and oblige SegurCaixa Adeslas and Zurich Seguros to pay 6,000 and 18,000 euros, respectively, in compensation to their policyholders.
Most likely, it is the Supreme Court that will have to go into the matter. This court will probably have to do an in-depth analysis that marks a before and after in the insurance industry, according to Pablo Franquet, a partner at the law firm Fieldfisher Jausas. For Franquet, a parallel can be drawn between what happened to the banks after the last crisis – with cases that sounded like the preferred ones – and the complex contracts of the insurers.
“Banking jurisprudence is likely to affect insurance,” Franquet predicts. “We have been in litigation for ten years where it has been seen that the banks used to sell things without explaining all the risks. Now the judges see the insurance policies and see parallels. An analysis will have to be made in depth of the insurance clauses and see what exactly the client has signed “.
The main conflict
The casuistry is varied, but the existing sentences allow us to see what the main conflict is. There are companies that, within their business risk policy, had contracted additional coverage for loss of profits or closure of the activity. A classic example of this would be a restaurant that has had a fire in the kitchen and has had to close: the insurer pays for the refurbishment and a certain amount for each day it has had to close the establishment.
When the state of alarm was declared, most establishments were forced to close for many days. Then, looking at their policies, they saw that they had contracted this coverage for closure of activity. And here comes the legal battle: what conditions must be met for the insurer to take over the closure and therefore the lost profits? “Companies are generally refusing to pay,” Franquet says. “They say that without prior property damage, such as a fire, they are not required to pay, but often the policy does not specify that.”
The small print
Insurance contracts are usually divided into two parts: the particular conditions and the general conditions. The latter contain small print and are “often not taught,” the lawyer argues. This is the case with one of the second-instance judgments that upholds the client. According to the court, the document with the general conditions “was not delivered” to the client and, therefore, he did not know what to stick to.
Another key aspect, although more cumbersome, is the differentiation between limiting and delimiting clauses. The former set out which aspects of the contract are excluded from the insurance, while the latter delimit what is included and what is not. This differentiation can be key to knowing who is right. “It depends on how the contract is drafted, a limiting or delimiting clause,” says Franquet. “This will be the big issue” when the cases end up in the Supreme Court, he anticipates.
As mentioned above, the time limit for claiming expires after two years. Given that the state of alarm ended three months later, it could be argued that the claim period expires next June, not March 14th. However, Franquet believes that this poses an unnecessary risk. “Technically, I think it should be possible to claim until June, but the most prudent thing is to do it before March 14. If not, the first thing the insurer will do is challenge it, claiming that it has already prescribed “.
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