Since our updates in July and August, new cases on business interruption coverage for COVID-19 losses have been trickling in and out of courts around the country. Over 1,000 cases have been filed against a variety of insurers. The graphic below depicts the insurers that have been named as defendants the most frequently, as of August 24, 2020:
The majority of cases turn on two issues: (i) whether there is a virus exclusion barring coverage in the insured’s policy and (ii) whether loss of use of property due to COVID-19 qualifies as a covered, “physical loss or damage.”
Courts have come to different conclusions. In the pending Western District of Pennsylvania case, Windber Hospital v Travelers Property Casualty Company of America, No. 220-cv-80, the defendants and class action plaintiffs’ briefs on Travelers’ Motion for Judgment on the Pleadings cited non-binding case-law from Texas and Missouri with opposing decisions on whether COVID-19 losses constituted “physical damage.” (The Pennsylvania Court previously denied Plaintiffs’ Motion for Summary Judgment as premature.)
New appellate cases outside of the COVID-19 context may help settle the courts’ interpretation of “physical loss or damage”. For example, the 11th Circuit of Appeals recently decided that dust and debris from nearby construction that made plaintiff’s restaurant unusable did not constitute “direct physical damage,” and therefore was not covered under defendant’s policy, because it could be easily cleaned up. The case is Mama Jo’s Inc. v. Sparta Insurance Co., Case No. 18-12-887 (11th Cir. August 18, 2020).
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