Background. During 2020 and into 2021, traditional insurers considered losses related to the pandemic to be outside 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. During the early days of the pandemic, the government restrictions that made it impossible to conduct certain types of business fit the force majeure definition. Not so in 2022, as people and businesses make adjustments and it becomes more difficult to argue that pandemics and their impacts were unforeseeable.
Impact. We anticipate an increase in lawsuits related to force majeure exclusions, as businesses attempt to convince the courts that their losses should be covered. We also expect insurers will look more closely at the language in their force majeure clauses, explicitly excluding pandemics, health orders and regulations of government agencies such as Health Canada, Homeland Security and Canadian Border Services Agency. Businesses burned once by an Act of God will look carefully at their coverage to prevent the situation from happening twice.
Top tip. Use your legal team to review your insurance coverage, including force majeure provisions, to help you determine if you need supplemental coverage. Your legal team—particularly external counsel—can determine whether the existing force majeure provisions apply to your situation and if there are exceptions that can be invoked.
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