Here is an update on Business Interruption Insurance claims related to COVID-19 as of April 15, 2020.  First, some businesses are now looking at cancellation coverage as a means to recover COVID-19 related losses. For example, organizers of the Wimbledon Championship expect to receive a large insurance payment as COVID-19 resulted in the cancellation of the tennis tournament. The pandemic insurance policy will pay out an estimated $141 million following the decision to cancel Wimbledon.  

     Second, several businesses have already filed lawsuits seeking declarations that they are entitled to recover business losses resulting from the COVID-19 pandemic. The lawsuits allege that a civil authority, either a county or state official, ordered the business to cease normal operations to contain the spread of COVID-19 and that potential COVID-19 contamination constitutes physical damage or loss, which is either expressly covered by the policy or is not expressly excluded by the policy.

  In some cases, the plaintiffs rely on policy language that, they claim, specifically covers loss or damage caused by a virus. For example, the owner of the French Laundry and the Bouchon Bistro in the Napa Valley community of Yountville filed an action on April 15, 2020 that asserts a claim for civil authority coverage and alleges that the insurance policy “specifically extends coverage to direct physical loss or damage caused by a virus.” The lawsuit states the policy with The Hartford Fire Insurance Co. not only does not have an exclusion for a viral pandemic but, in fact, a “Property Choice Deluxe Form” in the policy extends coverage for a loss or damage due to virus. The suit says the restaurants had to furlough 300 employees after shutting down because of an order issued by the Napa County public health officer on March 18 allowing take-out and delivery only. The suit asks the Napa County Superior Court to declare that the order constitutes a prohibition of access to the restaurants and that it triggers coverage under the insurance policy.

The California lawsuit follows a similar suit by the Oceana Grill in New Orleans against a Lloyd’s of London insurer. In addition, a complaint filed in the Southern District of Texas seeks coverage under a “Pandemic Event Endorsement,” which expressly covered, among other diseases, “Severe Acute Respiratory Syndrome-associated Coronavirus (SARs-CoV) disease” and its mutations and variants, but alleges that the insurer denied coverage because it concluded that COVID-19 is not a mutation or variant of (SARs-CoV) disease. 

         On the other side of the spectrum, restaurants and movie theaters in the Northern District of Illinois allege that the businesses are entitled to insurance coverage because the Illinois Governor ordered their businesses to close and their insurance policies do not expressly exclude losses “caused by a virus.”  The Northern District of Illinois suit alleges that if the insurer wished to exclude pandemic-related losses, it could have done so, as many insurers have.

Tags: Commercial Litigation, Insurance