Insurance
there is a small issue of loss due to
quarantine being excluded.
In China, the position is different.
Insurance companies in China are
promising to cover business losses from
the coronavirus pandemic. Since
February, dozens of insurers have rolled
out new policies or expanded existing
ones to provide compensation when
workers contract Covid-19.
The FCA case in the UK is being
expedited in order to reach a conclusion
as quickly as possible. A timeline for the
case, is that it is expected to go to court
on or close to 20 July. A best-case
scenario for pay outs if the case won,
would be late August or September,
although exact times are difficult to
predict. Matt Brewis, Director of
General Insurance at the FCA said “The
FCA’s motive is one of speed.”
Regardless of whether insurance
companies are pressured by regulators,
authorities or politicians to pay Covid-19
losses, the question remains as to
whether insurance clauses are too
onerous. If they are, because, that’s how
they always have been, maybe now is the
time to revisit them.
Force majeure
For the time being, let’s park the
insurance discussion and move onto
another favourite. The force majeure
clause.
Force majeure clauses are contractual
clauses that alter parties’ obligations
and/or liabilities under a contract when
an extraordinary event or circumstance
beyond their control prevents one or all
of them from fulfilling those obligations.
In English and Scottish law, force
majeure is a creature of contract. It
differs from some other legal systems
where it is a general legal concept,
where courts may declare that a
particular event, such as a pandemic like
Covid-19, is a force majeure event.
And that is the basic problem. Force
majeure is used and interpreted
differently across the globe. But, even if
the clause was agreed universally, how
Above:
Paul Cook
relevant is it in a global pandemic?
With little guidance from many
governments across the globe as to what
organisations should do to keep their
businesses going, the only thing they
could do to survive was to make every
effort to keep the cash coming in and cut
expenses. The way in which they did
this, highlights to what extent legal
clauses were used or abused. Let us take
a look at three instances.
One venue in Croatia decided not to
charge their client any cancellation fee,
despite losing a substantial amount of
money. The venue felt that building a
long-term relationship was the best way
to go and put their trust in the fact that,
hopefully, the client would come back to
them next year.
Then we have a venue in Paris that
decided to take a hard stance, despite
their own country being under
lockdown. Management argued that
they didn’t need to refund any deposit
monies to the planner as the event could
still go ahead. However, this couldn’t
happen and 24 hours before the event
was due to take place the venue agreed it
needed to be cancelled. The venue
offered the client the option of the same
rates for 2021 or they would refund the
monies. According to a clause in their
contract, the venue has up to 18 months
to refund the payment.
At the other end of the scale, there
was a venue (we are reliably informed)
that had agreed a contract with a client.
The client went to a site visit to discuss
additional items and in the meeting
confirmed what they wanted. The
meeting took place just as the
coronavirus was beginning to have an
impact. Seeing a problem, the venue
promptly charged the client for all the
extras the next day even though the
revised contract had not been signed off.
A tangled web we weave
Covid-19 has highlighted the extent to
which the business supply chains are
truly interwoven.
In the short term, and purely for
survival, what can organisations do to
stay afloat? At the moment they can
throw respective contract clauses, legal
arguments and insurance definitions at
each other, in the hope of securing a
payment.
Clearly there needs to be a better
solution for the future. Other waves of
the coronavirus could be coming and,
surely, will be another pandemic at some
point in the future.
International borders get in the way
of contracts especially in a global events
sector. Different countries have different
legal systems, insurance differs across
the world and force majeure clauses end
up adding to the confusion.
This prompts us to ask just how
relevant are some of these clauses today
and whether they still work for a society
that is so connected and so
inter-dependent?
Could contracts between parties be
just that? No territorial jurisdiction, but
reference to independent arbitration if
disputes need sorting out?
Is this the beginning of the end of
unreasonable legal clauses? If it isn’t
then maybe it should be. What else
could be a better catalyst for action,
other than a global pandemic that has
stopped business and society around the
world in its tracks?
ISSUE 107 / CONFERENCE & MEETINGS WORLD / 27