Early this month, I previewed some basic coverage issues faced by insured businesses and their insurers in the context of COVID-19. As the pandemic has spread across the US and crippled innumerable businesses, business interruption coverage litigation has begun, and some state legislatures are involving themselves in seeking coverage for insureds.
COVID-19 Business Interruption Lawsuits
In California, two Napa Valley restaurants have sued The Hartford in California Superior Court seeking a declaratory judgment that losses caused by government-mandated Coronavirus closures are covered under “civil authority” coverages in the restaurants’ “all risk” coverage. Plaintiffs allege there are no viral exclusions in the applicable coverage and that there has been property damage in the “immediate area” of the restaurants.
Earlier this month, a restaurant in New Orleans sued under its London market “all risk” business interruption policy that likewise lacks any applicable viral or pandemic exclusion. The plaintiff restaurant is seeking a declaratory judgment that coverage is owed for losses caused by government-mandated closures.
These suits are, of course, only the beginning of what seems certain to be years of coverage litigation stemming from COVID-19.
Legislative Developments
While coverage lawsuits ask courts to construe the terms, conditions, limitations and exclusions of applicable coverage, legislatures in some states may seek to sidestep the policies themselves, since many contain coverage exclusions or may otherwise bar coverage for COVID-19 claims. At least four state legislatures – in New York, New Jersey, Massachusetts and Ohio – are considering legislation that would effectively rewrite business interruption policies by preventing insurers from relying upon exclusions for losses caused by virus and the foundational requirement in BI policies that any claimed loss be caused by “direct physical loss.” Industry advocates are weighing in, and the outcome remains to be seen.
This content is provided as background and does not constitute legal advice. For more information or to schedule a free consultation, contact us at info@lalorattorneys.com / 646.818.9870.
Stay tuned for updates on the COVID-19 insurance coverage issues focused on New York and Connecticut law.
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