What are the consequences of Codiv-19 on insurance contracts?
Covid-19, this coronavirus, which appeared in China towards the end of 2019, has gradually spread, becoming a universal disaster affecting the majority of countries without distinction.
Unfortunately, Tunisia has not been spared by this pandemic which affects the lives of all citizens on a daily basis. With this in mind, several economic and social measures have been taken by the Tunisian Government, in order to deal with the difficulties expected in the near future in the various sectors.
This pandemic, in Tunisia as elsewhere, thus destabilizes all kinds of contractual relations such as insurance contracts, which is at the heart of this critical health situation.
The centerpiece of any insurance system is this unpredictable element that is beyond the control of the parties. Indeed, the risk that this element will or will not occur is the fundamental condition constituting an insurance transaction. Covid-19 is, therefore, not exempt from the general rule in insurance matters and is normally insurable depending on the type of contract.
Insurance contract and force majeure
First of all, the insurance contract is defined in Article 1 of the Insurance Code as an «… agreement by which an insurance company or insurer undertakes, in the event of realization of the risk or at the term fixed in the contract, to provide another person called the “insured” with a pecuniary benefit in return for a remuneration known as a premium or contribution. »
The principle under this Article is therefore, that the insurer has an obligation to provide a financial benefit in return for payment by the insured. However, in view of the health circumstances, can an insured person who is bound to respect the general confinement imposed by the State and who does not honor his part of the undertaking invoke force majeure? On the other hand, can an insurance company invoke forfeiture for breach of a principal obligation under the contract?
Under Article 283 of the COC, « force majeure is any fact which man cannot prevent, such as natural phenomena (floods, droughts, storms, fires, locusts), enemy invasion, the act of the prince, and which makes the performance of the obligation impossible. A preventable cause shall not be regarded as force majeure, if the debtor does not justify that he has taken all due care to protect himself against it. It is also not considered force majeure the cause which was occasioned by a previous fault of the debtor».
The event must, therefore, be both unpredictable and unavoidable. By unpredictable, the legislator understands an impossibility to start or continue the execution of the contract and by irresistible he understands an unavoidable unforeseeability of this event at the time of the conclusion of the contract. These conditions have, on many occasions, been comforted by Tunisian case law and, by way of example, the civil chambers of the Court of Cassation in decision No. 25213 of 4 April 2009 considered that «force majeure is any fact which man cannot prevent and which makes it impossible to perform the obligation».
Returning to our case in point, at the time of the conclusion of the insurance contract, neither the insured nor the insurer could have foreseen the current health situation, which can be considered as a case of force majeure, thus excusing the “momentary” non-payment of the premium. In addition, in a press release dated 22 March 2020, the Tunisian Federation of Insurance Companies (FTUSA) addressed the issue of motor insurance contracts by extending the validity of insurance certificates expiring on 22 March to 7 days after the end of the general health containment date announced by the public authorities.
In addition, Article 7 of the Insurance Code, which lists the obligations of the insured, provides that the forfeiture cannot be invoked against an insured against the impossibility of declaring a case of force majeure.
This solution partly resolves the issue, but once this crisis has passed, could the insurance company claim damages as a result of this delay on the assumption that the delay was due to a breach of contract? The answer, in our view, is clear from a reading of article 282, which provides that «no damages are payable where the debtor justifies that the non-performance or delay is due to a cause which cannot be imputed to him, such as force majeure, fortuitous event or the creditor’s residence».
Rescission or Cancellation: – In general, cancellation fees are refunded only in case of illness. At the time of departure, the insured person must prove that he or she has been hospitalized or that his or her doctor has contra-indicated (not recommend) travel, for example. It is important to refer to the contract for the scope and exclusions which may vary from one contract to another.
In this health situation, it is clear that all travel is contraindicated and in some cases is prohibited by the public sectors due to the rapid spread of the virus.
Repatriation: – Some travel insurance contracts even include repatriation clauses, but is this applicable?
If the insured person catches the Covid-19 coronavirus while abroad, the personal assistance benefits can be activated.
Indeed, on the advice of a doctor, repatriation can be organized and paid for (as for any other serious illness or accident). In our view, this requires the agreement of the public authorities, given the closure of air space in most countries.
Professional liability insurance:
Outside times of crisis, the legislator places a considerable number of obligations on the employer to protect the health and safety of employees.
In this critical health context and with the measures taken by the government, such as work stoppage for non-vital areas and application for business continuity authorization, if an employee catches the Covid-19 virus through contamination in the company, the inexcusable fault of the employer could be engaged. And in this case, the employer cannot rely on Article 104 of the COC, which provides that «there shall be no civil liability in the case of self-defense, or when the damage was produced by a purely fortuitous cause or force majeure which was neither preceded nor accompanied by a fact attributable to the defendant». Indeed, force majeure cannot be applicable given the foreseeability of the possibility of contamination.
With regard to construction, the first paragraph of article 95 provides that « the client must insure, with an insurance company, the liability of all the participants mentioned in article 1 of the law relating to liability and technical control in the field of construction, and this, by virtue of a single insurance contract per building site taken out before the opening of the building site».
We are therefore, faced with a group insurance policy, also known as a group insurance contract, taken out by the employer for the benefit of his employees and their heirs. The group insurance contract may cover the entire salaried workforce or only one category of persons in the company. The employees can therefore continue to work on the construction sites as they are insured. However, in the face of the latest health events, all gatherings have been banned, and by the way, gatherings of workers have been banned except for a few vital sectors. This situation will inevitably lead to delays on construction sites.
Failure to meet deadlines results in late penalties. Under normal circumstances, these costs are part of the risk borne by companies. Indeed, the company has a schedule and must keep to it, unless, it assumes the consequences.
The public authorities have pointed out in recent days that, under certain conditions, penalty clauses can be neutralized by the recognition of force majeure, but these measures concern public contracts.
In this particular context, private sector companies may therefore request exemption from penalties, on a case-by-case basis, by invoking a case of force majeure