In the wake of the Coronavirus (COVID-19) pandemic, countless businesses have reduced or closed operations—some permanently. Flights have been canceled, hotels and restaurants have closed, and employees have been told to stay home. Naturally, businesses will seek to offset their financial losses during this period. Some businesses may file insurance claims under their Business Income coverage.
Common Business Income (and Extra Expense) Coverage Forms might state: “We will pay for the actual loss of Business Income you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration’. The ‘suspension’ must be caused by direct physical loss of or damage to [covered] property ….” There has been much discussion of what constitutes “physical loss” and of policy exclusions relevant to viral pandemics. In this article, we will focus on the causation required for business income coverage. In other words, if a policyholder establishes direct physical loss to covered property because of COVID-19, and the insurance policy at issue contains no exclusions that preclude coverage, the policyholder must still demonstrate its business income losses were caused by the physical loss.
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A recent decision from one of New York’s trial courts of general jurisdiction could have a chilling effect on written communications between an insurer and its retained counsel during a claim investigation. In Otsuka America, Inc. v. Crum & Forster Specialty Insurance Co., 2019 WL 4131024, Judge Andrea Masley of the Supreme Court of the State of New York, New York County, ruled that several communications between Crum & Forster (CF) and its attorney (including the attorney’s coverage opinion letter), were not privileged and must be produced. The Court found that CF retained counsel, in part, to provide an opinion on whether the insured’s claim was covered. Determining whether a claim is covered is part of the regular business of an insurance company, according to the Court. As such, the communications between CF were deemed discoverable.
Texas policyholders can no longer cut deals with storm repair contractors to pocket their deductibles for storm repairs. The Texas Legislature has amended the Texas Insurance Code and Texas Business & Commerce Code, targeting construction companies that offer “free roofs” and “waived deductibles” as enticements to policyholders. Previously, for example, contractors would reach an agreement to perform work for a policyholder, but waive or absorb the portion of the repair cost equal to the deductible. This waiver or absorption could occur through numerous paperwork tricks. Now, the policyholder must pay its deductible, otherwise the insurer can refuse to pay certain claims and the contractor can be charged with a crime. 
Those familiar with first party insurance policies have undoubtedly encountered a recurring issue with the interpretation of appraisal provisions – what does it mean to disagree on the amount of loss? In Valvano Realty Co. v. American Fire and Casualty Co., the United States District Court for the Middle District of Pennsylvania recently held that a disagreement on the amount of loss encompasses situations where an insurer claims it needs additional documentation before it can determine whether a disagreement exists. Valvano involved a December 18, 2015 fire at the Plaintiff’s property in Dickson City, Pennsylvania, which was insured by American. American’s adjuster, working with a retained construction consultant and structural engineer, determined the replacement cost value of the loss to be $140,920.61, and the actual cash value to be $110,608.34. Plaintiff disagreed, claiming the building was a total loss, and demanded the policy limit for property damage of $850,113. American paid its adjuster’s determination of the actual cash value of the loss ($110,608.34) and, in response, Plaintiff indicated its intent to invoke the policy’s appraisal provision to settle the dispute. The relevant provision states as follows: 
A property insurer, having paid for covered damage, can recover the loss by seeking reimbursement from its insured where the insured has recovered funds from a responsible third-party, or the insurer may pursue a claim directly against the third-party. If the insurer makes a direct claim against the responsible party, to what extent must the insurer allocate the money it recovers to reimburse the insured for its deductible? In an opinion issued on July 3, 2019, the Washington Supreme Court held that a fault-free insured must receive the full amount of its deductible before the insurer may allocate any of the recovered funds to itself. Daniels v. State Farm Mutual Automobile Insurance Co., Wash., No. 96185-9, 2019 WL 2909308 (July 3, 2019). 
Insurance companies may no longer be allowed to rely on clear policy language that expressly excludes general contractor overhead and profit (“GCOP”) from actual cash value payments. The Pennsylvania Supreme Court recently agreed to hear argument on the issue in Kurach v. Truck Insurance Exchange, Case No. 532 EAL 2018.
Law enforcement in Miami-Dade County, Florida 
