December 3, 2020 – A policyholder booked a trip to a football match in Great Britain. After the corona-related cancellation of the game, the organizer did not want to repay the travel price, and the legal protection insurer did not want to cover a lawsuit. For the broker’s arbitration board involved, a dispute over the reimbursement of travel expenses in the event of a cancellation is not a typical consequence of the exceptional situation; the insurer was recommended to cover.
A company has business legal protection insurance, which also includes private legal protection for its legal representative. He had booked a trip through a website for Liverpool FC’s soccer game against Aston Villa on April 11 this year.
In the wake of the Covid 19 pandemic, gatherings of more than two people were generally prohibited in Great Britain at the time of travel; therefore all Premier League games, including those that were part of the booked trip, have been canceled.
The website operator then offered either a credit for a trip in the next year or a cancellation with a refund of 20 percent of the travel price. The customer, on the other hand, demands the reimbursement of the entire travel price of 1,900 euros and invokes the organizer’s terms and conditions.
Follow a sovereign order
The insured company then demanded legal protection coverage for its co-insured. The insurer refused the cover with reference to the general legal protection conditions (ARB 2016).
According to these, there was no insurance cover for the perception of legal interests “in connection with sovereign orders which are directed to a majority of people due to an exceptional situation”.
According to the insurer, there is a sufficient connection between this exclusion and the safeguarding of interests. The policyholder then turned to Legal service and arbitration body of the professional association of insurance brokers (RSS).
She argued that a dispute about the reimbursement of a trip canceled as a result of the corona crisis was only about “indirect” effects of sovereign orders.
Cancellation due to an exceptional situation
The insurer made a written statement to RSS. He explained that the exceptional situation had to be causal for the issuance of a sovereign order, but not for the occurrence of the damage event.
For the application of the exclusion situation it is essential that there must be a corresponding connection between the current legal dispute and the sovereign order. A mere context is required in the ARB.
The exclusion of risk is not limited to the perception of legal interests in direct connection with sovereign orders, but is also to be applied to the disputes connected therewith. The legal dispute must be a typical consequence of sovereign orders.
According to the insurer, such a connection exists in the case at hand. The football game was canceled due to an exceptional situation, the dispute with the organizer was a typical consequence of the cancellation of the trip due to the exceptional situation.
Interpretation of risk exclusions
In its statement, the RSS declares that risk exclusions may not be interpreted further than their meaning requires, taking into account their economic purpose and the chosen language as well as the regulatory context.
The disputed clause summarizes facts that are excluded from insurance cover due to the risk of accumulated damage.
It can be assumed that there was a sovereign order that was addressed to a majority of people due to an exceptional situation.
Not every context matters
However, the Supreme Court ruled in a decision that not every connection is important for the realization of an exception. The typical increase in risk that led to the inclusion of the exclusion must be realized in the legal dispute.
According to the RSS, this should be answered in the negative in the present case. Whether a tour operator has to reimburse the travel expenses when a trip is canceled for reasons for which the traveler is not responsible is a legal dispute that could arise at any time even without the current pandemic.
This legal dispute is therefore not a typical consequence of the sovereign orders described by the exclusion. The insurer was therefore recommended to cover the legal dispute.
Further information
The recommendation of the RSS of July 3, 2020 can be used as PDF document (387 KB) can be downloaded from the association’s website.
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