Insurance Law

Insurers rack up early wins in lawsuits over COVID-19 'business interruption' coverage

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Court decisions on "business interruption" coverage are so far favoring insurers as they fight claims for lost income during the COVID-19 pandemic.

Courts have ruled for insurance companies in state courts in California, Michigan and the District of Columbia, as well as in federal courts in Texas and California, the Wall Street Journal reports, citing information from a COVID-19 litigation tracker at the University of Pennsylvania Carey Law School. The Chicago Tribune also had coverage in a story published in August.

Two other judges indicated that they would rule against COVID-19 claims by a Miami restaurant and a magazine publisher. The publisher, Social Life Magazine, dropped its case before a Manhattan federal judge issued a written opinion.

Lawyers for policyholders aren’t giving up hope, however. They note that many suits are awaiting a decision, and appeals courts have yet to rule. And plaintiffs lawyers were said to be “energized” by a Missouri federal judge’s Aug. 12 ruling allowing business interruption claims to proceed, reports.

Many business interruption policies require “direct physical loss or damage” to property for coverage to apply. Others specifically exclude coverage for damage caused by viruses. The policy in the Missouri case did not exclude virus damage but did require a direct physical loss.

The plaintiffs in the Missouri case had argued that the coronavirus is a physical substance that attached to and damaged their properties, and their all-risk policies should cover lost income.

Insurers argue that policies are intended to cover business losses caused by physical damages to property from events such as fires, and COVID-19 causes no physical damage.

The Insurance Information Institute said the federal government, rather than insurers, should help.

“We don’t want to put funds at risk for something that was never underwritten by the industry in the first place,” said Sean Kevelighan, CEO at the Insurance Information Institute, in an interview with the Chicago Tribune.

As court losses mount, a coalition of small businesses is backing a House bill, the Business Interruption Relief Act. The bill would create a voluntary program for insurers to pay claims and obtain reimbursement from the federal government.

See also: “Coronavirus pandemic prompts wave of ‘business interruption’ lawsuits by restaurants”

ABA Journal: “Coronavirus cancellations mean revenue loss, potential liability” “Insurance company’s suit says it has no duty to cover Geragos firm’s COVID-19 business losses”

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