Is there a chance that a claim for compensation for hotels and restaurants can occur due to the measures taken during COVID-19? From the beginning of the pandemic of the coronavirus (SARS-CoV-2) in mid-March 2020, the hospitality industry was hit particularly hard by containment measures.
According to the Federal Statistical Office, March already left behind serious economic losses with a drop in turnover of almost 50% in the restaurant and accommodation industry. In addition, according to the Federal Statistical Office, overnight stays in accommodation establishments in April were down by around 89% on the same month of the previous year.
Even though there have been isolated and gradual easing of the restrictions since 18 May, the hotel and restaurant industry continues to suffer massive economic losses. Many hoteliers and restaurant owners have to fight for their existence. Therefore, the demands for appropriate compensation are also becoming louder.
We at Schlun & Elseven Attorneys at Law will therefore show you which compensation options are currently being discussed and which may be possible for you. Furthermore, in this article we will address the question of whether hotels and restaurants can demand payments from their insurance companies. In addition, this article we will provide an overview of previous court decisions on compensation claims. If you require more specialised assistance or need further information, our qualified lawyers are always available to advise and support you.
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Compensation for Hotels /Restaurants under the Infection Protection Act
The measures taken by the Federal Government to contain the spread of the coronavirus (SARS-CoV-2), in particular the statutory orders on business closures and far-reaching restrictions in the hospitality industry, were based on §§ 28 ff. Infection Protection Act (IfSG). This law provides for individual claims for compensation in § 56 IfSG.
According to this law, individual persons, or more precisely “persons who have left the hospitality industry, persons suspected of infection, other carriers of pathogens”, who were prohibited from carrying out their gainful employment to protect against infection and who suffered loss of earnings as a result, can in principle claim compensation in money. According to its wording, the law and the compensation regulated in § 56 IfSG is tailored to individuals and does not explicitly include compensation claims for the closure or restriction of the earning capacity of entire companies.
Other regulations specifically designed to affect entire businesses and companies do not exist in the Infection Protection Act either. For this reason, many lawyers are of the opinion that a claim for compensation for hotels / restaurant closures, as demanded by the hospitality industry, cannot arise from the Infection Protection Act.
However, it cannot be ruled out that with a detailed argumentative basis and the reference to the fact that the hospitality industry had to make an extraordinary sacrifice in the COVID-19 pandemic, a corresponding claim for compensation can nevertheless be derived from § 56 IfSG. In addition, the containment measures, including the closure of restaurants and accommodation facilities, were also based on § 28 IfSG, although these measures are not explicitly provided for there.
The unprecedented pandemic of the COVID-19 coronavirus (SARS-CoV-2) has called for extraordinary measures that go beyond the wording of the Infection Protection Act. It is now basically not possible to argue the contrary for corresponding compensation measures. However, it should be noted that the enforcement of such a decision by the authorities and in court always depends on the circumstances of the individual case and requires comprehensive legal expertise, especially in this case.
Compensation for Hotels / Restaurants from other Claims under Public law or Constitutional Law?
It cannot be denied that the catering and hotel industry had to make a particular sacrifice in the early days of the pandemic. In addition to a corresponding application of the Infection Protection Act, the unwritten public law compensation claims recognised under customary law could therefore be considered. These come into effect if the property was encroached upon by sovereign measures in an expropriating manner (in the case of a lawful measure) or in the same way as expropriation (in the case of an unlawful measure) and thus constitutes a special sacrifice on the part of the business or business owner.
With regard to the restrictive measures, compensation on the basis of expropriatory intervention seems more likely. This is because the urgent applications by the hotel and restaurant operators, which were mostly rejected by the courts, suggest that the measures to curb the spread of the coronavirus were predominantly lawful. However, even this assessment always depends on the circumstances of the individual case and on possible alternatives to the orders made. In any case, the prerequisites for a claim for compensation arising from expropriatory intervention are that, among other things
- there has been a lawful direct interference with property,
- the effect of which was to destroy or endanger the existence of the company
- and in comparison with other sectors concerned, there is a particular unreasonableness (“special sacrifice”).
In the predominant opinion, the protection of property also includes the right to the established and exercised business, which was particularly severely restricted by the closures of the catering trade. Moreover, it is quite clear, also on the basis of the turnover figures, that the hotel and restaurant industry was and is particularly severely affected by the COVID-19 measures compared to other economic sectors.
A final assessment of whether such a claim for compensation for hotels / restaurants can be enforced before the courts in the case of measures based on the Infection Protection Act cannot be clearly identified. However, such a claim cannot be excluded from the outset either.
Court rulings on Possible Claims for Compensation
There have already been isolated court rulings on compensation claims for hotels / restaurants and other businesses under the Infection Protection Act and on expropriating or expropriation-like operations.
On the one hand, the Heilbronn Regional Court decided on 29.04.2020 (Az. I 4 O 82/20) that compensation under § 56 IfSG was not apparent. One of the reasons given for this was that the plaintiff owner of a hairdressing salon did not fall under the express addressees of the compensation claim, i.e. “dropouts, suspected infectious agents, suspected sickness or other carriers of pathogens”. A corresponding, extended interpretation is not necessary due to the rescue packages of the German Federal Government, because there is no gap in the regulations. A claim for compensation from expropriating or expropriation-equivalent intervention was denied by the fact that there was no intervention in the property of the proprietor solely because of lost earning prospects, which is however questionable.
On the other hand, the Higher Administrative Court of Lower Saxony on 23.04.2020 (file no. 13 MN 96/20), when reviewing a COVID-19 legal regulation in the course of a norm control procedure, opened up the possibility that so-called “non-disturbers” could assert a claim for compensation under police and regulatory law.
Overall, it is not yet possible to derive a clear line of the courts from these isolated decisions. In particular, there is a lack of unambiguous case law of the highest courts. This also means, however, that the aforementioned claims for compensation for hotels /restaurants are not excluded from the outset and are certainly achievable with detailed legal examination and structured and well-founded legal argumentation.
Insurance Payments as Compensation?
Furthermore, the question of compensation for establishments in the hotel and restaurant industry is whether the insurance pays. There are already numerous disputes with insurance companies expected, possibly culminating in legal proceedings. Conflicts with the insurance companies have arisen mainly because they claim that the special and expensive business closure insurance policies do not apply to pandemics in general, but only if a business has to close down due to an outbreak of infection.
Urgently needed insurance payments are therefore already being completely refused or only partially granted.
Regional Court decides in Favour of the Insured
A judgement of the regional court Mannheim (Az. 11 O 66/20) clarifies that it is absolutely worthwhile to take action against the blanket negation of the occurrence of the insured event in the business closure insurance and to dispute this in court. This is because on 29.04.2020, the court ordered the insurance company of a hotel operator to pay out the insurance benefit from the “business interruption insurance contracts”.
In this case, the insurer denied that there had been an officially ordered closure of the hotel business because the official legal regulations and general rulings only prohibited tourist overnight stays. Reference was made to the possibility of booking business trips and that a closure of the business would not have been necessary. The court stated that the current situation was such that the far-reaching restrictions on hotel operations had the effect of a de facto closure because business travel only accounts for a small proportion of turnover and this was also affected by the effects of the COVID-19 coronavirus pandemic.
Depending on the wording of your insurance contract, the associated contractual clauses and the conditions for an insured event contained therein, payments that have been refused to date may well be achievable. It is therefore advisable to engage an experienced lawyer with extensive expertise and to seek individual advice from them.
Conclusion and legal expertise
Ultimately, it is clear that the successful assertion of compensation claims or payments by insurance companies will depend on the understanding and interpretation of laws, contracts, contractual clauses and conditions. In court, therefore, constructing a convincing argument is crucial. This must be tailored to your personal individual case, as the facts of the case can vary considerably due to the different legal regulations of the different federal states and the contractual conditions of the insurance contracts.
Our experienced lawyers from Schlun und Elseven will support you with their extensive expertise in a variety of legal fields in and out of court and advise and assist you in all legal matters.
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