These are difficult times for the global fast food industry, long in the crosshairs of a creeping crisis. Inflation crisis beating hard: in the United States, according to the latest Circana report, 86 percent of food consumption takes place at home and out-of-home has gone by the wayside. Also exposed to the “storm winds” is a giant like McDonald's, which, not surprisingly, ended the second quarter with an overall decline in sales, the first since 2020, or the first in 13 quarters. That said, it seems no coincidence that even a U.S. fast food giant like McDonald's is trying to scrape as much of the bottom of the barrel as it can in order to stay afloat with its accounts. 

The latest new in this otic comes, for McDonald's, from a French court that has issued an unexpected and in some ways sensational ruling, which traces the issue back as far as, four years ago, to the covid-19 crisis, Well, the ruling issued by the Bordeaux Court of Appeals has ordered the French insurer MMA to compensate its insured, namely the McDonald's fast-food chain, for business interruption losses. This is a first, as previous appellate court decisions tended to be unfavorable to insureds. 

The court also decided to remove the cap on the amount to be compensated, which could cost MMA up to 1 billion Euros. The issue in the case was whether the decree that prevented public access to store and restaurant sales premises during the initial lockdown period (but did not prevent takeout sales or “click & collect”) constituted a lockdown under insurance contracts that use this term as a condition of coverage.

The Supreme Court first addressed the issue in early 2024, closing the debate with two rulings (filed Jan. 25 and June 2024) regarding restaurant and catering businesses. The first states, “The insured's clients and suppliers [event organizers, hotels, châteaux, reception halls] fell within the categories covered by the measures prohibiting the reception of the public, which meant that they were closed by order of the authorities, characterizing their default under the contract.” The French Supreme Court's second ruling goes a step further: “the March 15, 2020 decree prohibited restaurants from serving the public, which constituted a closure of the establishment by order of the authorities under the contract.”

In fact, the new ruling of the transalpine Court of Appeals takes note of these two rulings of the Supreme Court and sanctions that, in the McDonald's case, “insurers will no longer be able to invoke the possibility of take-out and click & collect sales to refuse coverage to restaurateurs.” A key consequence for the dispute between McDonald's and MMA.

There remains a contractual ambiguity regarding the 300,000 Euros guarantee limit set by the contracting party: the question is whether the guarantee limit applies to each insured or to the entire policy. The Court of Appeals seems to believe that it is the maximum coverage provided for each insured. Subject to the judicial expertise required by the courts, the amount of compensation owed by MMA could cost 300,000 Euros, multiplied by the number of deductibles involved. Billion-dollar stuff that, if it goes through, will worry the insurance industry.