Insurance carriers have filed over 100 motions to dismiss in the more than 1,000 business interruption (BI) cases already filed that seek coverage for losses from COVID-19. All of these motions to dismiss allege that the insureds have not, under the standards of Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007), alleged enough facts to prove damage or structural alteration to their property, which the insurers claim is required under the policies at issue as a prerequisite for BI coverage.

The motions filed by the insurers include several in cases where the insured plainly alleged that COVID-19 caused damage or loss to its property but where the insurer nonetheless insisted that the allegations needed to be more detailed. See, e.g., Actors Playhouse Prods., Inc., v. SCOR SE & General Sec. Indem. Co. of Ariz., Case No. 1:20-cv-22981-MGC (S.D. Fla. Sept. 3, 2020).

Continue Reading Insurer Files Goldilocks Motion to Dismiss and Insureds Get First Unqualified Win

Several decisions and numerous pending motions filed during the last few weeks have transitioned the litigation over COVID-19 Business-Interruption (BI) claims from what seemed like a preliminary event, namely the quarrel over whether COVID-19 contamination is property damage, to what may well turn out to be the main event: the meaning of the various exclusions for pollution, contamination, and microorganisms that insurers have cited when denying claims.

Many BI policies have exclusions for viruses, but also specifically provide coverage for communicable diseases, typically with a relatively low limit. The courts will have to figure out how these specific provisions interact, how the communicable-disease limits apply to broader BI claims, and how virus exclusions apply to general BI coverage, particularly when the policyholder believed it was purchasing coverage for contamination. See Thor v. Factory Mutual, Civ. No. 20 CV-3380, Mot. To Dismiss (S.D.N.Y. Aug 17, 2020). Given the arcane language and structure of many BI policies, the insureds seem to have a good argument that they were confused by all the conflicting language and deserve some type of coverage for BI. But resolving these issues will likely require discovery into the explanations for why the exclusions were added to BI policies as well as a review of prior interpretations of the exclusions in other contexts—this issue does not seem susceptible to a decision on a motion to dismiss. Continue Reading Now for the Main Event: [Litigation Over] the Virus Exclusion and Civil Authority

As previously reported in this blog, the U.K. Financial Conduct Authority (FCA) brought a case against a variety of insurers under 21 policy wordings seeking clarification of sample clauses because the carriers refused to pay any U.K. claims relating to COVID-19 business interruptions largely for hospitality businesses. The policyholders seem to have won most of the coverage issues, and indeed the carriers have announced that they would book significant losses.

The basic issues involved the coverage for a series of extensions (specified loss clauses) to basic Business Interruption (BI) coverage, which covered the closure of a business due to an order of a competent governmental authority based on the existence of a notifiable disease in the vicinity of the covered business. These extensions have relatively low limits under $50,000. Given these low limits, it was financially impracticable for individual policyholders in the United Kingdom to separately litigate their claims against their insurers. As such, the insurers appeared to be denying claims on the assumption that most policyholders would not be in a financial position to press their claims. The recent decision in the case brought by the FCA will now allow tens of thousands of U.K. small-business policyholders an affordable path to coverage.

Continue Reading FCA Case Provides a Win for Policyholders and Vindicates the Concept of Expedited Generalized Rulings for Small Businesses

In the last few weeks, since our last blog on this topic, another 50 cases have been filed seeking recovery of business-interruption losses from COVID-19. These include a case brought on behalf of adult entertainment clubs shut down by the virus-related closure orders (Rialto Pockets, et al v. Lloyd’s of London, Civ. No. 2:2020cv07709 (C.D. Cal. Aug. 24, 2020)), and a case claiming that covered governmental negligence in stopping COVID-19 caused the closure orders (Consolidated Restaurant Operations v. Westport Ins., Civ. No. 2020cv58095 (NY Sup. Ct. Aug 5, 2020)).

Continue Reading The Fat Lady Has Not Sung Yet

Since the beginning of the COVID-19 pandemic, hundreds of businesses of all sizes have been forced to file lawsuits against their property insurers for failing to honor their contractual obligations to provide business interruption, extra expense, civil authority, and other coverage for the substantial losses caused by the COVID-19 pandemic. Unfortunately, this onslaught of litigation has produced little progress thus far, leaving hundreds of business-owner plaintiffs and thousands more interested outside observers waiting for the funds they are rightfully owed.

This update discusses the lessons that businesses can learn from these early decisions and proposes guidance on how to generate meaningful progress towards timely resolution of such COVID-19 coverage disputes.

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Due to the COVID-19 pandemic, institutions of higher education are facing significant revenue challenges and incurring extra expenses for which their insurance programs should provide relief. Potentially covered sources of loss and damage include (1) efforts to make buildings safe for students, faculty, staff, and administrators, (2) tuition adjustments, loss of athletic and extra-curricular events revenue and related sponsorships, and (3) extra expenses and/or lost revenue related to student housing issues.

Continue Reading Higher Education COVID-19 Losses: Property and Business Interruption Insurance Policies Should Provide Relief

In 1964, futurist Arthur C. Clarke predicted that in 50 years, people “will no longer commute—they will communicate.” For a significant portion of the American workforce, the future is now. COVID-19 has fundamentally changed how we communicate: The virtual meeting is suddenly our primary means of interaction with coworkers. Video conferencing platforms like Zoom, Microsoft Teams, and Cisco’s WebEx have seen unprecedented spikes in active users. As companies transition from triage to planning for the new normal, the prevalence of video conferencing has serious implications for commercial litigation. Face-to-face discussions that were only memorialized by meeting notes or related correspondence can be fully preserved as video files, subject to discovery. It is therefore essential to understand the technical functionality of virtual meeting recordings and the likely legal obligations that accompany them.

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The insurance industry in the United States continues to thwart legislative solutions for disputed COVID-19-related losses under property/business interruption policies and resists efforts to group lawsuits together into multi-district federal litigation or class actions. Meanwhile, the independent regulator of insurers in the United Kingdom, the Financial Conduct Authority (FCA), is trying to take a more organized and direct approach. Although the FCA indicated that it did not believe coverage existed for most claims for COVID-19-related losses, the FCA has identified the key language at issue in the various insurance policies, the universal or prevalent facts presented, and the legal questions posed. The regulator has announced an initiative to begin resolving these disputed claims by bringing a series of test cases in U.K. courts to answer these coverage questions. Though the test cases are being resolved under the law of the United Kingdom, the outcomes are likely to influence American courts that are grappling with many of the same issues under similar insurance policy language. Depending on the success of the test cases in streamlining these disputes in the U.K., U.S. policyholders may want to consider adopting a similar approach to fast-track their claims towards settlement.

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In the latest episode of the podcast series Insurance Considerations Amid COVID-19, we are joined by Deborah White, president of the Retail Litigation Center (RLC) and senior executive vice president and general counsel of the Retail Industry Leaders Association (RILA). Deborah provides insight and analysis regarding the retail industry’s varied and innovative response to the pandemic, including how large retailers deal with the patchwork of evolving state and local regulations and how they are innovating at breakneck speed to meet consumer demand while maintaining safety for employees, suppliers, and customers. Not surprisingly, we also talk about masks, how we all got our start in retail, and a little … insurance.

Continue Reading Podcast Series: Key Insurance Considerations Amid COVID-19

General liability coverage is insurance that responds to sums that the policyholder is legally obligated to pay as damages because of bodily injury or property damage to third parties (and generally will also include either a duty to defend such claims or to reimburse defense costs). Thus, general liability coverage would respond to such tort claims as slip-and-fall lawsuits and product liability exposures. In addition, most such policies also cover certain enumerated personal or advertising injury offenses (such as defamation or disparagement).

Most general liability policies are written on an “occurrence” basis. An occurrence-based general liability policy is triggered to respond by bodily injury or property damage taking place during its policy period, regardless of when the claim is made against a policyholder. Given multi-year statutes of limitations for many torts and the possibility of latent injuries, this means that it is frequently a prior year’s occurrence policy (or policies, for long-term injury claims) that responds to a claim that comes in during the current year.

Continue Reading Key Issues to Consider When Contemplating a Switch From an Occurrence-Based to a Claims-Made General Liability Insurance Program