Coronavirus Business Insurance Lawsuits

The COVID-19 coronavirus pandemic is wreaking havoc to the global and national economies. Most businesses that have not been deemed “essential” have been ordered by city, state, and federal authorities to shut down for the time being, leading to significant revenue losses and layoffs. While the measures are necessary to limit the spread of the virus, the damage to many businesses may be difficult, if not possible, to overcome. When an unexpected event causes injury to a business, companies expect to be able to rely on their insurance coverage to fill the gap.

Many professional insurance providers, however, have been dragging their feet in providing coverage for losses resulting from the pandemic, claiming policy exclusions for these losses. Several lawsuits against insurance providers have begun to crop up around the country. If you are facing business interruption as a result of the coronavirus pandemic and your insurance provider is being intransigent, reach out to a seasoned and passionate California business insurance denial attorney for assistance in pursuing your claims.

California Upscale Restaurant Chain Sues Insurance Provider

Here in California, a professional chef who owns several Michelin-rated restaurants across the country has filed a lawsuit against Hartford Fire Insurance Company in a California state court. The lawsuit, brought in Napa County, alleges that the plaintiff’s business operations were shut down as a result of county and state orders responding to the coronavirus pandemic.

The restaurants claim that they are insured under an “all risks” insurance policy, which should provide coverage for lost business income and other expenses incurred when an order from a civil authority prevents access to the business as a result of a covered loss in the immediate area. The restaurants allege that closure due to the coronavirus qualifies as physical loss or damage under the civil authority coverage provision in the policy. The policy has no exclusion for closures caused by viral pandemics as opposed to, say, an earthquake.

Hartford rejected the restaurants’ business interruption claim. According to Hartford, the claim was denied because there were no “dangerous conditions” at the restaurant. The plaintiff, in turn, argues that a virus clearly constitutes a “dangerous condition,” even if it is not the typical kind of physical damage associated with such claims.

Coronavirus Business Interruption Claims

The plaintiff’s attorney in the Hartford matter openly admitted that the suit is intended to establish a precedent favorable to policyholders harmed by the coronavirus epidemic. Other similar lawsuits have begun popping up around the country. The cases raise an interesting issue: can non-physical “damage” like a virus pandemic count as a dangerous condition, particularly where the problem is not that a virus exists on the premises but instead that the business has been ordered to close to promote social distancing?

The Hartford complaint tries to address the issue by claiming that the virus “physically infects and stays on surfaces of objects or materials” for up to 28 days, satisfying the requirement for physical damage and danger. Many property damage insurance policies, however, do explicitly exclude viruses from business interruption coverage. The exclusions were added after the SARS virus epidemic in 2003. Some state legislatures have been trying to pass legislation as a workaround to these policy exclusions, but state law has limited power to target specific contracts or provisions. It is hard to predict how the courts will decide, but there is room for a shift in the law given current circumstances.

If you have a business interruption claim or other insurance policy issue in southern California or statewide, call the insurance denial attorneys Drake & Drake, P.C., at 818-624-4695.