Force Majeure And Insurance Considerations For COVID-19 Cancellations

 Thursday, March 19, 2020

 Risk Management Magazine

As the coronavirus (COVID-19) forces the cancellation of countless events, businesses are finding themselves assessing both their losses and their remedies.

Suddenly, that boilerplate language in the fine print of contracts discussing an “Act of God” has taken on a whole new level of importance. Understanding what this means for your organization can make the difference between an unmitigated disaster and a business saving reprieve.

“Force majeure” is defined by Black’s Law Dictionary as an “event or effect that can be neither anticipated nor controlled.” A force majeure clause allocates risk among the contracting parties if performance becomes impossible or impracticable because of such an event.

However, despite force majeure clauses being relatively standard in contracts, there is limited legal guidance on the application to this legal principle to epidemics or potential pandemics such as COVID-19.

Accordingly, those businesses who are making decisions based on a belief that the coronavirus and the surrounding public safety concerns should provide a contractual excuse for non-performance may be in for a surprise.
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