Compensation for the closure of the business during the State of Alarm
Can compensation be claimed from insurance companies for the stoppage of the economic activity of a business as a result of covid-19?
Since the pandemic derived from COVID-19 was declared by the World Health Organization (WHO) and the serious damage that it produced in human beings was verified, practically All States adopted very restrictive measures to safeguard the health of their citizens even at the cost of having to close millions of companies to reduce the spread of the virus. An example of this was the declaration of the State of Alarm decreed by the Government of Spain on March 14, 2020, which, in successive extensions, adapted the restrictions and limitations to the different business activities carried out in our country.
The consequences of these restrictions and temporary closures were immediate, and millions of companies suffered great economic losses during the validity of these exceptional legal measures.
Given this situation, the question arises as to whether the losses suffered as a result of said closure would be covered by the insurance policies subscribed by the businessmen and if, consequently, compensation could be claimed from the insurance companies for the economic losses suffered during all the months that these closures and restrictions in their businesses lasted.
The answer to this question depends on many factors but, in general terms, the jurisprudence is opting to consider that it is possible to claim compensation from the insurers for the losses suffered during the time of mandatory closure of their businesses.
This has already been indicated by various courts, being able to cite Judgment no. 59/2021, of February 3, of the Provincial Court of Girona (Section 1), Judgment no. 254/2021, of June 16, of the Provincial Court of Girona (Section 2), or the recent Judgment of the Court of First Instance No. 14 of Granada, of July 21, 2021, with number 166/2021.
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Consequential Damages and Lost Profits
Before addressing the requirements indicated in these judgments to consider that the losses suffered by the closure of their businesses can be claimed from their insurance companies, we must explain what is the consequential damage and lost profits, concepts that make up the legal category of damages.
In this regard, article 1106 of the Civil Code states the following:
“Indemnity for damages includes not only the value of the loss they have suffered, but also the value of the profit that the creditor has failed to obtain, except for the provisions contained in the following articles.”
What is Consequential Damage
We can define consequential damage as the real, effective and accredited loss that occurs after receiving damage. In such a way that its existence is fully proven by justifying the perceived damage by providing invoices or other documents that can justify it.
Example of Consequential Damage
To understand it with an example, this damage could be that suffered by a restaurant that has bought different products to cook its dishes, which, due to the mandatory closure of its business, are not has been able to sell to customers, and as a consequence of this, they are already useless having expired.
What is Loss of Profits
With regard to lost profits, this could be understood as the repair of the loss of profits foregone as a result of damage, which , had it not occurred, would not have caused the income to be foregone.
For any business forced to temporarily close due to COVID-19, the lost profit would consist of the economic benefit not received as a consequence of the impossibility of open your business normally.
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Requirements for the viability of the claim
Having seen the above, it is worth pointing out the requirements that courts currently take into account when granting these compensations in favor of the insured:
1º.- The injured party must prove that they have taken out an insurance policy that covers damages and losses derived from the stoppage of the activity during the period closure derived from the State of Alarm by COVID-19.
That is, you must prove that you are the holder of an insurance contract that contains a clause according to which the insurance company must indemnify the insured for the time that elapses without the latter being able to Exploit your business.
2nd.- It will be necessary to analyze the possible existence of exclusions to coverage, specifically, those that affect compensation for forced cessation of the activity of the trade as a result of a pandemic.
However, if this clause were included, for it to be applicable it must be highlighted in a special way in the policy compared to other common clauses of the contract and, in addition, it must have been accepted expressly by the insured, all of this in accordance with the interpretation that the Supreme Court has given to article 3 of the Insurance Contracts Law since, if it has not been done in this way, the clause will be abusive and will be annulled, which would determine its inapplicability.
3rd.- Damage caused to the business or to the products offered by it as a result of the temporary closure of the commercial activity, will have to be accredited through invoices or other documents that verify their economic value.
4th.- Finally, the economic benefit not obtained as a result of the temporary closure must be credited with the profits of previous years obtained in the same period where economic activity was paralyzed.
Conclusions
Analyzing the above, we can conclude that any person or company that meets the above requirements could, a priori, file a claim and request financial compensation from their insurer. However, it is important to point out that the specific clauses included in the contract will have to be examined, in order to be able to adequately assess the legal actions to be taken in order to guarantee the proper feasibility of the procedure.
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14/09/2021
