Insurance Recovery Law

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

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