A recent article in Law360 shines a spotlight on an Amended Complaint filed by Pillsbury’s award-winning Insurance Recovery and Advisory Group in a significant insurance recovery action seeking coverage for COVID-19 business interruption. In it, the Amended Complaint is described as a “beefed-up filing” where our colleagues have “unleashed a deluge of scientific studies on COVID-19.” The article suggests that the “the arguments outlined in Tuesday’s filing could be a potential avenue around Mama Jo’s v. Sparta Insurance Co., a heavily cited decision in which the Eleventh Circuit held that policyholders must show their properties required physical repairs to constitute direct physical loss. A number of insurers have pointed to that ruling in shooting down COVID-19 insurance cases.”
The Biden administration has hit the ground running with executive orders, regulatory and legislative priorities, and cabinet-level and other top posts being announced on a daily basis. Our public policy colleagues have been closely tracking many of the policy priorities of the new administration and highlighting important regulatory and legislative developments that businesses can expect coming down the pipeline.
Since the beginning of the COVID-19 business interruption insurance coverage battles, insurers have labored to pour cold water on these claims—often hiring the biggest and wealthiest law firms in America to crush hair salons, motels, restaurants and bars represented by solo practitioners or lawyers with little prior insurance coverage experience. Not surprisingly, insurers have been successful in many of these early David-versus-Goliath cases (many of which involved policies with virus exclusions that the policyholders were seeking to avoid by pointing to government shutdown orders—and not the virus—as the sole cause of their loss), as we recently discussed. But the tide is turning as, increasingly, courts are applying the policies as written—rather than how insurers wished they had been written—and finding clear paths to coverage for COVID-19 claims. One such recent California federal district court case, Pez Seafood DTLA, LLC v. Travelers Indemnity Co., is a must-read for policyholders with COVID-19 losses, especially in California.
Since the novel coronavirus landed in America, the insurance industry has worked hard to create the impression that there is no coverage for business interruption losses resulting from the pandemic. For the most part, insurers have discussed the “intent” of the policies and avoided specific policy analysis. The insurer disinformation effort recently started including citations to lists of court decisions obtained to date—as if insurance coverage should be decided not on the terms of the contracts at issue but instead on the basis of an early win/loss record. A review of court statistics, along with two recent court decisions, expose the fallacy of the insurers’ argument.
If 2020 was the year of the pandemic, 2021 appears to be shaping up to be the year of “returning to normal.” So far, most coverage disputes related to COVID-19 have been reactions to direct losses caused by the virus and related measures (i.e., relating to business interruption or event cancellation). In the upcoming months and years, however, many businesses will have to make proactive decisions on how to return to work. It is important for businesses to understand how those decisions may impact a variety of potential insurance coverages, including possible D&O coverage, as this post will discuss. Additionally, now that insurance companies have a better understanding of the types of risks involved with COVID-19, coverage terms and exclusions in policies issued after the pandemic may become drastically different.
The United States declared a national emergency in response to COVID-19 on March 13, 2020, and states quickly followed with stay-at-home orders that impacted businesses and institutions nationwide. It has now been nine full months since the pandemic emerged in the United States and businesses began to shut down in the face of contamination and civil authority orders effecting restrictions on access to and use of their premises.
Like many businesses, colleges and universities across the country have had to dramatically alter their operations in response to the coronavirus pandemic. Most students completed the spring 2020 semester through online instruction after campuses closed in response to rising infection rates and government shutdown orders. According to the Chronicle of Higher Education, roughly one-quarter of institutions of higher education are providing instruction this fall semester either fully or primarily in person, one-quarter are using a hybrid model, and the remainder operating fully or primarily online.
One word that aptly describes the devastation that is 2020 is “relentless.” The COVID-19 pandemic has caused both personal and economic suffering throughout the world for over six months. Against the backdrop of the already devastating effects of COVID-19, several regions in the United States have recently experienced powerful storms and historically large wildfires. The wildfires in the western United States and Canada have been especially catastrophic this year—burning millions of acres, forcing evacuations, damaging air quality, and creating blankets of smoke extending over much of the country. The fires have destroyed homes and businesses and will lead to hundreds or thousands of insurance claims under homeowners, commercial property, and business interruption policies.
What happens under First Party Property/Business Interruption insurance when more than one arguably covered cause of loss impacts a business at the same time?
His daughter missing and a secret government program uncovered …
Ben Affleck’s detective thriller Hypnotic was next in line to be on the actor’s list of blockbuster films. That is, until the COVID-19 pandemic halted the film while it was still in pre-production. To insure against such business interruption risks and delay, Hypnotic’s production company, Hoosegow (Hypnotic) Productions Inc., had purchased a Film Producer’s policy from Chubb National Insurance Company.
We have been carefully monitoring the litigation filed across the country, where businesses are seeking coverage for the business interruption losses arising from the government closure orders issued to address COVID-19. Some of the Closure Orders expressly refer to property damage, but it is important to actually plead facts that address the language in the relevant insurance policy and the insured losses sustained. In all the trial court decisions we have reviewed so far, the policies generally cover property coverage and related business interruption where there has been a “direct physical loss or damage” to the insured premises. Many also include separate civil authority coverage for business interruption losses sustained if the premises are ordered shut or partially shut down due to properties within a defined radius of the insured premises suffering from “covered causes of loss”—again, generally physical loss or damage. Some of the policies also include virus exclusions, but early motions to dismiss have focused on the question of whether COVID-19 has caused physical loss or damage to the premises insured.