Insurance coverage suits related to COVID-19 are appearing all over the country. Businesses are attempting to recover for COVID-19 related business losses. However, recovery largely depends on the specific policy terms and the particular facts of the situation. For instance, some policies contain a "Virus Exclusion Clause" which generally precludes coverage for any loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease. Policyholders should carefully review their policy to determine whether COVID-19 related losses are covered.
The two cases below demonstrate the intricacies of COVID-19 insurance coverage issues. In the first case out of Pennsylvania, the insurance coverage could potentially apply to COVID-19 losses. While, in the second case out of California, the Court recently determined that COVID-19 related losses were not covered. In both cases, the center of attention was on the specific language used in the respective policies.
Boscov's department store brought suit in Pennsylvania, challenging the scope of its insurance coverage and attempting to recover losses due to COVID-19 related shutdowns. Boscov's Department Store Inc. v. American Guarantee & Liability Insurance Co., No. 20-cv-3672 (E.D. Pa. Dec. 29, 2020). Notably, Boscov's insurance policy contains a provision that provides coverage for the threatening presence of a virus on the insured premises.
Boscov argues that its commercial insurance coverage protects it from the revenue loss caused by COVID-19 shutdowns. The insurer argues that the economic loss sustained by the shutdowns is not covered under the policy because the shutdowns have not caused physical damage to the insured property. Fundamentally, it appears that the outcome of this case will depend on the interpretation of the language used in the policy.
The owner of a restaurant in California sued his insurer for lost business income due to COVID-19 shut down orders issued by the government. Pez Seafood DTLA LLC v. Travelers Indemnity Co. et al., No. 20-cv-4699, 2021 (C.D. Cal. Jan. 20, 2021).
The restaurant owner submitted a claim to his insurer to cover lost business income, and the insurer denied coverage. Subsequently, the restaurant owner filed suit, asking the Court to determine the scope of his insurance coverage. The Court determined that COVID-19 related business losses were not covered in the restaurant owner's insurance policy. The formative language of the insurance policy excluded coverage for “any virus, bacterium or other microorganisms that induce or are capable of inducing physical distress, illness or disease."
These cases emphasize the importance of knowing how to efficiently and effectively navigate your business through COVID-19. If your business needs support in managing COVID-19 related issues, please feel free to contact us with any questions.
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This article is for informational purposes only and does not constitute legal advice.