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www.uslaw.org U S L A W
Business Interruption Insurance Lawsuits Related to
COVID-19 Shutdowns Explode William B. Graham and Melisa C. Zwilling
The coronavirus disease pandemic came out of nowhere and has literally shaken almost every individual and business to the core. While the scientific and medical communities bear the tremendous burden of saving human lives, the insurance industry is being called upon, in essence, to save the economic lives of businesses across the country by way of business interruption insurance claims. The insurance industry has overwhelmingly taken the position that business interruption policies do not cover claims related to COVID-19. As a result of coverage denials, businesses are filing lawsuits requesting that courts force insurance companies to pay. In fact, business interruption lawsuits filed in federal courts increased by 300% from March through June 2020, according to one legal analytics firm. Experts expect the number of cases ultimately filed to be in the thousands.
Carr Allison
DIRECT PHYSICAL LOSS OF OR DAMAGE TO PHYSICAL PROPERTY Many standard business policies provide coverage only for losses caused by direct physical damage. Some plaintiffs have argued that the presence of the coronavirus on their premises constituted physical damage. Others have argued that the forced closure of their business was sufficient to have directly affected the use of the property as required by their policy. Insurers have, in turn, argued that COVID-19 has not caused a direct physical loss and, therefore, the claims are not covered under the policies at issue. Whether a direct physical loss has been suffered by an insured will likely be a key issue in almost all COVID-19 business interruption litigation. VIRUS EXCLUSIONS Many commercial policies specifically exclude “loss or damage caused by or re-
sulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.� This language, insurance companies assert, clearly applies to the coronavirus and supports the denial of business interruption claims. Thus, even if a business suffered a direct physical loss or damage, insurers argue that claims for COVID-19 would still be excluded from coverage. COURT DECISIONS With several months having passed since the first business interruption cases were filed, some courts across the country have begun to issue decisions which provide some insight into how the novel coverage issues may be resolved. The first opinion came from a circuit court judge in Michigan in Gavrilides Management Company, et al. v. Michigan Insurance Company. The court held that no coverage was owed under
