Court Authorizes Another Legal Action To Obtain Business Interruption Insurance Coverage For COVID-19 | Seyfarth Shaw LLP

More and more evidence of radical change?

On August 16, 2021, the Clark County District Court in Nevada dismissed an insurance company’s petition to dismiss a homeowner’s lawsuit seeking insurance coverage against home losses. exploitation due to COVID-19. A key defense often cited by insurers in response to such claims is that physical loss or damage is necessary to trigger coverage and neither is a result of COVID-19. In that lawsuit, the owner claimed that the impact of SARS-COV-2 virions and COVID-19 exposure on interior surfaces of the building amounts to an alteration of property conditions resulting in physical damage. Without deciding the question on the merits, the court found that the complaint was sufficiently damaged to trigger insurance coverage and authorized the investigation of the case.

In another case, the Superior Court of County Durham, North Carolina, went further and granted summary judgment to policyholders. The plaintiffs, a group of restaurants, had purchased “all-risk” property insurance that covered business disruptions due to direct physical loss or property damage. Restaurants have been forced to close in response to government orders regarding COVID-19. They sought to recover their business interruption losses from their insurers, who rejected their claims on the grounds that there had been no direct physical loss or property damage. In court, the restaurants argued that the direct physical loss of the property includes the inability to use the property, which occurred when government COVID-19 orders prevented them from operating their restaurants. The court recognized that their operating losses were covered by insurance policies.

While the majority of COVID-19 business interruption insurance cases have been resolved in favor of insurers, policyholders are gaining a foothold. As of mid-May 2021, there were more than 50 decisions in which the courts had either rendered summary judgment for policyholders pursuing such claims or dismissed insurers’ petitions to dismiss them. Scott N. Godes, State of the Law Business Interruption Insurance Coverage for COVID-19 Claims, Volume XI, Number 134, Nat’l L. Rev. (May 14, 2021).

This is not a negligible figure.

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Justin D. O'Neill

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