Legal aspects of the pandemic caused by Covid-19. Insurance and the Insurance Compensation Consortium

Since the State of Alarm was decreed in our country since March 15, a month ago, the businesses of many entrepreneurs and self-employed workers, if they have not been truncated in their expectations, have gone through an unsustainable economic situation when their activity is paralysed and in many cases operating in a practically paralysed market as a consequence of the current pandemic caused by Covid-19.

The media are reporting daily on the ineffective management of the Government, publishing daily data that points to an alleged responsibility of the Government in terms of the prevention, strategy and treatment of a pandemic, which must be added and as strictly objective data, it has caused thousands of deaths in Spain, which places us in the first place in the world ranking of deaths per square meter of inhabitants compared to other countries.

Many situations are causing the spread of the pandemic, before which the first question to ask is who will assume compensation for both property and moral damages.

INSURANCE COMPANIES AND INSURANCE COMPENSATION CONSORTIUM.

Although it is necessary to verify the contracted policy, we can go ahead to say that the damages caused by a pandemic are excluded from the insurance coverage that many people, companies and freelancers have contracted. The claim to insurance companies would be unfeasible both for economic losses and for the closure of an activity.

Is it possible that the damages are assumed by the Insurance Compensation Consortium?

The Insurance Compensation Consortium (CCS), is a public law entity whose income does not come from the general state budgets, but from private insurance premiums that collect a percentage of the fee that we all pay and that goes directly to the CCS.

By law, the CCS only assumes the payment of material damages and loss of benefits (lost profits), to the holders of insurance contracts for the so-called “extraordinary risks”. The legal definition of “extraordinary risk” is limited to those caused by nuclear catastrophes, volcanic eruptions, floods, etc., the claims caused by epidemics are not included in the Extraordinary Risks Regulation.

The debate is open if we consider that there is a precedent in Spain on the occasion of the extratropical cyclone Klaus that caused numerous damages in January 2009. Despite the fact that the Atypical Cyclonic Tempest was not included in the regulations as an extraordinary risk to be covered by the CCS, was assumed by said entity, justifying at that time that the nature of the Consortium is to assume this type of extraordinary risks.

Should the CCS be required to assume the pandemic as an extraordinary risk, as the entity assumed in the case of Cyclone Klaus?

The answer is negative. The decision at that time to assume the compensation derived from the catastrophe obeyed legislative policy and an agreement with the insurance companies, since by the principle of legality if the Regulation does not foresee an event as an extraordinary risk, the claim has very few signs of prospering.