Background
Omaj, the operator of a brasserie and restaurant, purchased a commercial multi-risk insurance policy from Allianz IARD. The policy included a “Complément plus” endorsement covering business-interruption losses.
After French public-health measures prohibited restaurants from receiving customers from March 15, 2020, through June 2, 2020, Omaj submitted a claim for its resulting losses. Allianz denied coverage, relying on a policy exclusion that listed two grounds: an “epidemic or pandemic context,” and deliberate violations of labor-law or professional regulations, including health-and-safety rules. Omaj sued Allianz, but the Paris Court of Appeal held that the pandemic exclusion was valid and denied all relief. Omaj appealed to the Court of Cassation.
The Court’s Holding
The Court of Cassation rejected Omaj’s appeal and held that Allianz owed no coverage. Under Article L. 113-1 of the French Insurance Code, coverage exclusions must be formal and limited; an exclusion is not formal if it lacks precise criteria and requires interpretation. The Court nevertheless reconsidered its 2021 precedent under which the presence of any non-formal exclusion in a clause invalidated the entire clause, even when the exclusion actually invoked against the insured was stated precisely.
The Court held that when one policy clause lists several grounds for excluding coverage, each ground must be assessed separately for formal clarity. An invalid, non-formal exclusion does not invalidate the entire clause unless it impairs understanding of the other exclusions. Here, the “epidemic or pandemic context” exclusion was unambiguous, required no interpretation, and was formal and limited. Its validity therefore was unaffected by any imprecision in the clause’s separate exclusion for deliberate regulatory violations.
Key Takeaways
- French courts must ordinarily assess each separately listed ground for excluding insurance coverage on its own.
- A non-formal exclusion no longer invalidates every other exclusion in the same clause unless it impairs their comprehensibility.
- An unambiguous exclusion for losses arising in an “epidemic or pandemic context” barred Omaj’s COVID-19 business-interruption claim.
Why It Matters
The decision expressly changes the Court of Cassation’s approach to partially defective exclusion clauses. It preserves clearly drafted exclusions even when another exclusion appearing in the same provision is insufficiently precise, while continuing to invalidate exclusions that require interpretation or lack defined criteria.
For insurers and policyholders, the ruling narrows the consequences of defective drafting: invalidity will generally attach only to the deficient exclusion, rather than automatically nullifying the entire clause.