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