Second Circuit Holds No Coverage for COVID-19 Business Interruption Losses

Posted on January 19, 2022 by Elliot Kerzner, Alycen A. Moss

The Second Circuit has now joined the Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits in holding that no insurance coverage exists for business interruption losses caused by the Covid-19 pandemic and the associated government orders. In 10012 Holdings Inc. v. Sentinel Insurance Co. Ltd., No. 21-80-cv, Slip. Op. (2d Cir. Dec. 27, 2021), the insured fine arts gallery and dealership in New York City sought coverage under three provisions of its insurance policy for losses and extra expenses incurred when it suspended its operations in accordance with government restrictions on non-essential businesses during the Covid-19 pandemic. When the insurer denied coverage, the insured filed suit asserting claims for breach of contract and declaratory judgment. The United States District Court for the Southern District of New York dismissed the claims with prejudice, and the insured appealed to the United States Court of Appeals for the Second Circuit.

About The Authors

Tagged with: 10012 Holdings, arts gallery, business interruption, civil authority, Coverage, New York, second circuit, Sentinel Insurance
Posted in Uncategorized

Major Victories for Insurers in Fifth Circuit Regarding COVID-19 Business Interruption Claims

Posted on January 7, 2022 by Karl A. Schulz

The Fifth Circuit Court of Appeals has joined seven other Circuits in finding no coverage for COVID-19 business interruption claims.[1] In Terry Black’s Barbecue, L.L.C. v. State Auto. Mut. Ins. Co., 2022 U.S. App. LEXIS 287 (5th Cir. Jan. 5, 2022) and Aggie Invs., L.L.C. v. Continental Cas. Co., 2022 U.S. App. LEXIS 393 (5th Cir. Jan. 6, 2022), the Fifth Circuit considered claims under all-risk policies. In Terry Black’s Barbecue, the policy included provisions for loss of business income and extra expense. To trigger such coverages, the policy required that the suspension of operations “must be caused by direct physical loss of or damage to property at the premises.” The policy’s definition of “period of restoration” was the period of time that begins at the time of loss or damage and ends when the property is “repaired, rebuilt or replaced” or when operations resume at a new location. Further, the policy contained a restaurant extension endorsement providing civil authority coverage “resulting from the actual or alleged … exposure of the described premises to a contagious or infectious disease.”

About The Author

Tagged with: business interruption, civil authority, covid-19, extra expense, Insurance
Posted in Uncategorized

Seventh Circuit Continues String of Insurer Victories in COVID-19 Business Interruption Litigation

Posted on December 21, 2021 by Karl A. Schulz

At least five Circuit Courts of Appeal have now come out in favor of insurers in COVID-19 business interruption lawsuits.[1] The latest is the Seventh Circuit Court of Appeals in Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 2021 U.S. App. LEXIS 36399 (7th Cir. Dec. 9, 2021). The Court in Sandy Point resolved three claims in one opinion under Illinois law. The three plaintiffs were a dentistry practice, a hotel, and restaurant. Each business was allegedly impacted by orders issued by Illinois’ governor to stem the spread of COVID-19.

Each of the businesses’ policies included a familiar coverage threshold of a “suspension” caused by direct physical “loss” to property at a premises caused by or resulting from a Covered Cause of Loss. “Loss” was defined in the policies as “accidental loss or damage.” The Court observed that by “incorporating the stated definition of ‘loss,’ the [b]usinesses were covered for income losses resulting from direct physical loss or direct physical damage to property. Thus, to survive [the insurer’s] Rule 12(b)(6) motion, they needed to allege that either the virus or the resulting closure orders caused direct physical loss or direct physical damage to covered property.”

About The Author

Tagged with: appellate court business income, business interruption, civil authority, covid-19, extra expense, ingress, physical loss or damage, SARS-CoV-2, suspension
Posted in Uncategorized

COVID-19 Business Interruption Claims: First California Court of Appeal Decision Holds That Closure Orders Are Not “Direct Physical Loss”

Posted on November 18, 2021 by Dina R. Richman

California has been a hotbed of litigation regarding COVID-19 business interruption claims. The vast majority of the trial courts have held in favor of insurers and against businesses. Now, the California Court of Appeal has weighed in. In a published decision, The Inns by the Sea v. California Mutual Insurance Company (November 15, 2021, Case No. D079036), the Fourth Appellate District held that a hotel’s business income loss resulting from the COVID-19 pandemic was not covered.

About The Author

Tagged with: Business Interruption Coverage, California, Civil Authority Coverage, covid-19, Insurance, shutdown order
Posted in Uncategorized

Federal Court Holds that the Voluntary Payment of an Appraisal Award Plus Penalty Interest Defeats TPPCA Claims Under Texas Law

Posted on November 15, 2021 by Donnie Mike Apodaca, II

In 2019, the Supreme Court of Texas issued a pair of decisions that allowed policyholders to prosecute claims under the Texas Prompt Payment of Claims Act (“TPPCA”) even after the insurers paid appraisal awards. The decisions were a modification of law and so post-appraisal litigation has and continues to evolve. One such example is a recent decision from District Judge Tipton of the Southern District of Texas in White v. Allstate Vehicle and Property Insurance Company, which has provided a potential road map for insurers looking to curb post-appraisal demands and litigation after the payment of an appraisal award.[1]

About The Author

Tagged with: appraisal, Insurance, litigation, Prompt Payment of Claims, Texas, TPPCA
Posted in Uncategorized

Ninth Circuit Holds COVID-19 Business Interruption Losses Require Direct Physical Damage To The Property

Posted on November 09, 2021 by Michael W. Melendez, Alicia Gurries

In March 2020, Mudpie Inc.—a San Francisco children’s store—ceased operations when California Governor Gavin Newsom ordered all “non-essential” businesses to close due to the COVID-19 pandemic. Because of the shut-down, Mudpie sought coverage for loss of “business income” and “extra expense” under a commercial property policy issued by Travelers Casualty Insurance Company of America (“Travelers”). The Travelers policy provided coverage during the “period of restoration” for loss of business income due to the necessary suspension of the insured’s operations caused by “direct physical loss of or damage to the [insured’s] property.”

About The Authors

Tagged with: Actual Damage, business interruption, COVID Coverage, Insurance, shutdown order
Posted in Uncategorized

Insurer Wins First Jury Trial on Coverage for COVID-19 Business Interruption Losses

Posted on November 02, 2021 by Alycen A. Moss, Elliot Kerzner

An insurer has won the first jury trial on coverage for Covid-19 business interruption losses after a federal jury in the Western District of Missouri issued a verdict in favor of The Cincinnati Insurance Company in K.C. Hopps Ltd. v. Cincinnati Insurance Co., Case No. 4:20-cv-437 (W.D. Mo. 2021). In K.C. Hopps, the insured, K.C. Hopps Ltd. (“Hopps”), owned and operated bars, restaurants, catering services, and event spaces in the Kansas City metropolitan area. In response to the Covid-19 pandemic, civil authorities in Missouri and Kansas issued stay-at-home orders in March of 2020. In accordance with the orders, Hopps’ operations were limited to delivery, drive-through, and carry-out services. Hopps submitted a claim to its insurer, Cincinnati Insurance Company, for coverage under its commercial property policy for “Business Interruption due to COVID-19,” and Cincinnati denied the claim. Hopps then filed suit against Cincinnati, seeking coverage under the policy’s Business Income, Extra Expense, Civil Authority, and Ingress and Egress coverage provisions.

About The Authors

Tagged with: business income, business interruption, cincinnati insurance company, civil authority, covid-19, egress, extra expense, ingress, jury trial, k.c. hopps, kansas city, restaurant, SARS-CoV-2, western district of Missouri
Posted in Coverage

Tenth Circuit Rules Against Insurer and Decides That Appraisers Can Decide Causation

Posted on October 12, 2021 by Karl A. Schulz

In the continuing saga of what can and cannot be appraised in a property insurance appraisal, the Tenth Circuit, in contrast to many other courts, has ruled appraisers can determine coverage issues.

In Bonbeck Parker, LLC v. Travelers Indem. Co. of Am., 2021 U.S. App. LEXIS 29607 (10th Cir. October 1, 2021), a hailstorm damaged three buildings covered under a commercial property insurance policy. A dispute between the insured and insurer arose over whether the hailstorm caused all of the damage claimed. The insurer paid some of the claimed damage, but denied coverage for other claimed damage, asserting that it was caused by non-covered causes such as wear and tear. The insured invoked appraisal.

About The Author

Tagged with: appraisal, appraiser, Causation, cause, Colorado, declaratory judgment, determine, loss, Tenth, Texas, umpire
Posted in Causation, Coverage, Uncategorized

Court in Montana Applies Anti-Concurrent Causation Clause to Earth Movement Exclusion

Posted on October 08, 2021 by Alycen A. Moss, Elliot Kerzner

A district court in Montana recently applied an anti-concurrent clause in a property insurance policy to preclude coverage based on an earth movement exclusion. In Ward v. Safeco Ins. Co. of Amer., No. 1:19-CV-0133-SPW, 2021 WL 3492294 (D. Mont. Aug. 9, 2021), the insured’s tenant reported that water was leaking from a main pipe serving the insured’s property, and the leak caused some soft spots to form in the floor of the kitchen. The insurer and agent’s subsequent inquiries led to the understanding that a leak under a slab affected the soil, which caused the house to settle, which then caused damage to the house.

About The Authors

Tagged with: anti-concurrent causation, broken pipe, district court, earth movement exclusion, excluded peril, Montana, property insurance policy, proximate cause, safeco, settling, ward, water leak
Posted in Anti-Concurrent Causation

When Better Late Than Never Isn’t Good Enough: Florida Federal Court Grants Summary Judgment For Insurer In Late-Reported Hurricane Claim

Posted on September 30, 2021 by Alexandra Schultz

On September 27, 2021, Judge Jose Martinez of the U.S. District Court for the Southern District of Florida granted summary judgment in favor of Scottsdale Insurance Company in LMP Holdings Inc. v. Scottsdale Ins. Co., case no. 20-24099. The case arose out of a Hurricane Irma claim reported more than two years after the storm.

The insured, LMP Holdings, Inc., owned a commercial property located in Miami. The insured claimed the property sustained damage from Hurricane Irma, which struck South Florida on September 10, 2017. The insured’s handyman and one of the insured’s officers inspected the property the day after the storm. The handyman noticed punctures on the roof, which he patched, and a panel from one of the air conditioner units on the roof that had come off. The insured’s officer noticed extensive water damage in the storage room and some water damage in the office reception area.

About The Author

Tagged with: Hurricane, Hurricane Irma, Insurance, insurance claims, late notice, late reporting, prejudice, property insurance
Posted in Catastrophes