For months, litigation over business interruption claims for COVID-19 losses have increased. Insurers have argued (1) “physical loss or damage” does not apply when COVID-19 is on the premises or when shutdown orders restrict use of the premises and (2) exclusions for losses caused by viruses apply even where losses result from shutdown orders.
Recently there have been significant wins for policyholders. On October 7, 2020, a North Carolina Superior Court in North State Deli, LLC et al v. The Cincinnati Insurance Co. et al, Case No. 20-CVS-02569 (N.C. Gen. Ct. Justice, Durham Cnty), granted partial summary judgment in favor of a group of restaurants who asked the court to declare their insurer must cover COVID losses under business interruption policies. The court concluded the policies provided coverage for loss of use and access to covered property mandated by shutdown orders.
The court reasoned the plain and ordinary meaning of “direct physical loss” includes “the loss of use or access to covered property even where that property has not been structurally altered.” Two other cases have also had favorable rulings for policyholders. See Urogynecology Specialist of Florida LLC v. Sentinel Insurance Co. Ltd., 2020 WL 5939172 (M.D. Fla. Sept. 24, 2020) (rejecting motion to dismiss because policy’s virus exclusion did not unambiguously exclude COVID-19); Lombardi’s Inc. v. Indemnity Insurance Company of North America, Case No. DC-20-05751-A (14 Dist. Ct., Dall. Cnty., Tex. Oct. 15, 2020) (rejecting motion to dismiss where policyholders alleged “disruptions to their ability to physically access and utilize portions of the properties were necessary to prevent the spread of COVID-19”). We are not aware of any appellate decisions on coverage for COVID-19 related losses.
Please contact us if we can help your business with any claims or litigation arising from coverage issues.
