In the greater Fort Lauderdale area, businesses have been hit hard by the shutdowns and slowdowns caused by the pandemic and we look to what is happening across the country for guidance. Hundreds of business interruption insurance claims have been filed across the country on behalf of businesses, both large and small, seeking coverage from their business insurance policies for losses due to COVID-19. Many lawsuits have been dismissed by the courts, but some have successfully moved forward. By analyzing the successful cases, law firms and attorneys are beginning to see winning strategies to ensure their clients get the compensation they deserve under their insurance policies for losses due to the COVID-19 pandemic.
Insurer Arguments
Insurers argue that the purpose of business insurance is to cover tangible items and to compensate for physical loss or damage. This has been a powerful argument before the courts, with many judges rejecting claimants because they have not demonstrated distinct, demonstrable physical alteration of their facilities.
Many policies also include virus exclusions, which were added in the years following the SARS outbreak in 2003. This policy exclusion has also proved to be very powerful in court, leading to most cases involving virus exclusions being dismissed – but not all.
Possible Winning Strategies
An OB/GYN practice in Florida that had a virus exclusion in its policy was able to proceed, arguing that the language of the policy was vague. The judge agreed, stating that denying coverage for virus or bacteria losses “does not logically align” with the “other pollutants” listed (fungi, wet rot, dry rot).
Some attorneys are challenging the notion that the virus does not cause “physical damage.” COVID-19 damage could be likened to smoke damage, which is not visible but makes an establishment unusable (temporarily or permanently). Recently a Missouri federal judge ruled that jurors should be able to decide the case of a group of restaurants and hair salons that were under an “all-risk policy,” stating that the virus made the properties “unsafe and unusable, resulting in direct physical loss to the premises and property.”
Other suits are attempting to move forward by targeting the government lockdown orders rather than focusing on physical damage. However, the most winning strategy so far seems to be arguing a physical presence of “virus particles” (like smoke particles) combined with a policy that does not have a virus exclusion.
The University of Pennsylvania law school maintains a COVID-19 litigation tracker. According to this database, insurer motions to dismiss were granted in 36 cases and denied in eight cases where the policy contained a virus exclusion. For cases with no virus exclusion, 10 dismissal motions were denied and 11 survived.
Your Particular Situation
Do not let the results of the UPenn database discourage you if you have a virus exclusion. As the successful Florida case points out, your particular policy language and your particular situation may provide a winning combination. And every case helps attorneys develop more convincing strategies that could result in success for our clients. Contact me today at (954)448-7288 to see how I can help you in your business interruption policy case.