2021-04-12
Last week, the Stockholm District Court delivered its judgment in one of this year’s most notable insurance coverage cases, Sturecompagniet / Gjensidige, concerning epidemic business interruption (BI) insurance.
Read our associates William Höglund and Agnes Carlsson’s brief of the judgment.
In Sweden, many businesses in the hospitality sector have been deeply affected by binding regulations issued by the Swedish Public Health Authority (Folkhälsomyndigheten) to prevent the spread of COVID-19.
The Swedish Public Health Authority issued a binding regulation (HSLF-FS 2020:9, and subsequently HSLF-FS 2020:37) which has impacted most businesses in the hospitality sector, i.e., restaurants, cafés, nightclubs, and cultural venues. The regulation states that the operators of hospitality premises must ensure that visitors are able to keep appropriate distance between each other, that there is no congestion, that patrons must eat and drink while seated at a table, and that standing service is not permitted. Consequently, businesses in the hospitality sector have been forced to significantly adjust their operations to comply.
In our article published in International Bar Association’s Insurance Committee publications in October 2020, we gave an account of Stockholm District Court’s case no. T 7676-20, the “Nightclub case”. The Nightclub case refers to one of Stockholm’s largest and most well-known nightclubs having been refused insurance coverage concerning epidemic business interruption (BI) insurance.
In the Nightclub case, the terms of the insurance policy in question stated that the insurance covers interruption resulting from public authority measures taken during the insurance period and which are caused by a contagious disease, taken against the insured premises, and pursuant to the Swedish Communicable Diseases Act (2004:168) (Smittskyddslag) or the Swedish Food Act (2006:804) (Livsmedelslag) in order to prevent the spread of contagious disease among humans.
The Stockholm District Court has now delivered its judgment in the Nightclub case, and the court does not consider the public authority measure originating out of the regulations to be covered by the insurance policy.
The court deemed it was clear that the regulations has entailed considerable limitations for the nightclub’s operations. The question of interest, however, was if the nightclub’s restriction of its operations constituted a damage under the insurance policy.
The insurance policy in the Nightclub case did not contain a definition of the concept “public authority measure” and neither party had put forth any investigation on industry practice that may provide guidance for the interpretation of the term.
The court based its judgment on Supreme Court precedents concerning interpretation of insurance policy wordings and standard form contracts, and thus considered several elements, such as the wording of the contentious clause. When the wording gives room for interpretation, or when it does not provide any information whatsoever, guidance may be sought in the system of the agreement, the other clauses, the clause’s intention and what may objectively be considered a reasonable and sensible regulation.The court considered the wording of the insurance policy at hand to indicate that, in order for insurance coverage to be applicable, the public authority measures had to be directed specifically at the nightclub. This was considered not to be the case, as the regulations apply generally to all applicable establishments. The court also considered the policy wording that the insurance would only apply insurance coverage for public authority measures taken at the insured premises, which the court interpreted as a public authority measure taken directly on certain insured premises.
In addition, further policy wordings required the insured to present a document which shows the period in which the operations, according to the public authority’s decision, was not able to operate. This also strongly implied that, for insurance coverage to enter, there had to be a public authority decision aimed directly at the insured.
Furthermore, the court referred to a policy wording which prescribed the insured to comply with regulations concerning specific procedures designated by law, regulation or a public authority and whose observation is meant to prevent the spread of communicable disease. This was considered further proof that a direct public authority decision is required for insurance coverage to enter.
The court thus regarded the insurance policy’s system and contents to suggest that the policy wording “public authority measures” refers to a decision directed at a specific business. The judgment is in line with the analysis in our IBA article published last year. The district court judgment does not constitute a widening of the scope of liability under epidemic business interruption insurances, which an opposite decision probably would have entailed. It remains to be seen if the judgment will be appealed.
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