A hotel in central Prague is preparing to battle insurance company Generali Česká pojišťovna who has refused to honour their insurance policy.

Well-known real estate developer Jean-Francois Ott signed a new comprehensive insurance for Hotel Smetana back in November 2019 including a separate policy covering business interruption, which he assumed, back in March, when the government closed all hotels to halt the spread of coronavirus would be covered by the insurance company. Now, Generali is claiming that Covid is not a valid insurance claim.

In addition to refusing to pay the money for the claim, the insurer also terminated the hotel’s half-year-old contract. Generali offered them a new one for the same price however with less coverage, but only on the condition that the clauses from the policy, the hotel claimed,  will be removed in the new policy. The feud is now likely to be settled in court.

Hotel manager Stefan Radstrom said that one of the reasons they chose Generali was that it was the only one that accepted interruption insurance in the contract, which covers risks not caused by the hotel management. He continued: “Our intention from the beginning was to protect ourselves from events that interrupt business without doing anything wrong. It’s not just about disasters or terrorist attacks,” he added.

The hotel management turned to a broker to arrange insurance for them at the end of March. They gave documents to the insurer several times, until June 12 this year, where Generali offered the amended contract.

Fourteen days later, on June 25, the insurer decided the hotel was not entitled to insurance premiums.

Hotel Smetana is in the process of preparing a lawsuit, demanding the payment of lost profits up to the amount of three million crowns. They are also considering suing the insurance company for allegedly misleading them. Radstrom has also accused the insurer of deceptive tactics: “They wanted to manipulate us to sign a contract. Generali never intended to pay the policyholder to insure these risks.”

Hotel lawyer Thu Nga Haškovcová is pursuing the refusal, based on two claims: “The first is the business interruption provision, where the claim arises if access to the hotel is prevented. The second is to ensure the costs of closing the hotel based on a public authority decision due to an infectious disease or notifiable diseases.”

It’s too early in the case to know who will win, but lawyer Tomáš Mácha predicts that Generali could succeed because the declaration of a state of emergency may fall under insurance exemptions. “Unfortunately, Covid-19 is probably an emergency that no one can influence except the government and parliament,” he says.

The insurance company echoed this, with its claim that at the end of July, representatives of the insurance company told them the state of emergency is one of the exclusions for insurance benefits. They state that a claim of an ‘interruption of operations’ would arise only if there was material damage to hotel property. Which does not include the spread of infectious disease that began outside of the hotel.