Business Interruption Insurance Claims for COVID-19 Losses

Thursday, October 29, 2020

Not lengthy after the COVID-19 shutdowns and stay-at-home orders started in mid-March 2020, companies throughout the nation submitted insurance coverage claims for misplaced income, usually underneath “enterprise earnings” provisions of their property insurance coverage insurance policies. Insurers denied the overwhelming majority of those claims, resulting in scores of lawsuits asking courts to make insurers honor their contracts. Litigation about these claims started inside weeks and undoubtedly will proceed for fairly a while. Courts across the nation have began issuing rulings and we’re seeing the panorama develop earlier than us.

These litigations usually handle two central arguments that the insurance coverage trade raises. First, insurance coverage firms contend that the insurance policies require “bodily loss or injury,” which they argue doesn’t occur when the SARS-CoV-2 virus is current on a policyholder’s premises or when native authorities bar or limit the usage of the premises. Second, some insurance policies have exclusions for losses attributable to viruses or different pathogens, which insurers cite even when the virus just isn’t current however a enterprise’ operations are suspended by authorities orders to fight the unfold of the coronavirus.

So far, we’re conscious of fewer than 40 rulings by courts addressing enterprise interruption claims for COVID-related losses. Though early selections have favored insurance coverage firms, there have been some wins for policyholders. For instance, in a lawsuit filed by a number of eating places, a court docket in North Carolina lately rejected the insurer’s argument {that a} virus doesn’t trigger bodily loss or injury. The court docket dominated on abstract judgment in favor of the policyholder, and held that the eating places’ lack of use of their property, attributable to authorities shutdown orders, constituted bodily loss. In one other latest case, a Florida court docket denied an insurance coverage firm’s movement to dismiss a criticism filed by a medical workplace, ruling that the virus provision in that specific coverage is ambiguous. Particularly, the coverage had an endorsement entitled “Restricted Fungi, Micro organism or Virus Protection” that purportedly excludes some however not all losses triggered no less than partly by the “presence, progress, proliferation, unfold or any exercise of ‘fungi,’ moist rot, dry rot, micro organism or virus.” The court docket thought of that COVID-related losses are logically distinct from the state of affairs described within the coverage exclusion. Courts in Philadelphia and Dallas additionally denied motions to dismiss circumstances (or the procedural equal) the place the insurance coverage insurance policies contained exclusions that insurance coverage firms allege are particular to viruses.

The truth that there are selections discovering language to be ambiguous, or figuring out that there’s protection, is important for policyholders. A number of states acknowledge {that a} break up in authority concerning the which means of an insurance coverage coverage is proof of ambiguity. And people states (as most do) acknowledge that when coverage language is ambiguous, the language needs to be construed towards the insurance coverage firm and interpreted in favor of protection.

We’re not conscious of any selections on the deserves of protection which have been issued by appellate courts. Taking into consideration that insurance coverage protection for these claims will virtually all the time be a matter of state fairly than federal legislation, it doubtless will take fairly a while earlier than any state supreme court docket points a binding precedential dedication of that state’s legislation on enterprise interruption protection for coronavirus claims. It can take longer nonetheless for any majority or consensus view to emerge among the many state supreme courts. (Once more, a consensus just isn’t the usual that policyholders ought to have to fulfill; many states acknowledge {that a} break up in authority is sufficient to interpret insurance policies in favor of protection.) Whereas it could be a prolonged course of earlier than there’s state supreme court docket authority, policyholders might want to take one other take a look at their insurance policies and denial letters, and think about proceed.