Covid-19 effect on insurance contracts: Pestalozzi’s suggestions to clients

As outlined several times in this particular moment, Covid-19 pandemic has made necessary that governments and authorities have to take several measures in response to the outbreak. These may also have significant impacts on insurance contracts and coverage. Indeed, parties to insurance contracts need to assess potential implications for their contractual rights and obligations. Beat Schwarz, partner at Pestalozzi writes a client note on this topic, that we will briefly summarize below:

  • There is no general answer to whether insurance coverage is affected by the extraordinary situation caused by the Covid-19 outbreak and so analysis should be on a case-by-case basis.
  • Policyholders should review their policies and consider and assess any applicable notification or mitigation obligations.
  • Business interruption insurance may require compliance with safety regulations and cooperation with the authorities.
  • The parties should consider whether there is a possibility to terminate insurance contracts in advance, as some insurance contracts entitle the parties to terminate the contract in the event of damage.
  • Insurance contracts could include specific rules regarding increase of risks, for example by obliging the policyholder to notify certain increases of risk to the insurer.