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Background. During 2020 and into 2021, traditional insurers considered pandemic-related losses to be beyond the control of the parties to the contract. As a result, they invoked the force majeure clause (also known as the “Act of God” clause) and excluded claims related to COVID-19. At the start of the pandemic, government restrictions that made it impossible to conduct certain types of activities met the definition of force majeure. This is not the case in 2022, as people and businesses make adjustments and it becomes harder to argue that pandemics and their impacts were unpredictable.
Impact. We expect an increase in lawsuits related to force majeure exclusions, as companies try to convince the courts that their losses should be covered. We also expect insurers to take a closer look at the wording of their force majeure clauses, explicitly excluding pandemics, health orders and regulations from government agencies such as Health Canadahomeland security and Canada Border Services Agency. Businesses burned once by an act of God will carefully review their coverage to prevent the situation from happening twice.
Superior Council. Ask your legal team to review your insurance coverage, including force majeure clauses, to help you determine if you need additional coverage. Your legal team, especially outside counsel, can determine whether existing force majeure provisions apply to your situation and whether there are any exceptions that may be invoked.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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