Local: (805)-371-3680 | Toll Free: (800) 240-CHIV
The legal fight over whether insurance companies have to pay for coronavirus-related losses is ongoing, with new developments happening in courts daily.
According to reports, a case filed by a New Orleans restaurant owner will head to trial in Louisiana. Cajun Conti, which operates the Oceana Grill in the French Quarter, is thought to have filed the first lawsuit against an insurer for denying Covid-19 business-interruption losses.
Judge Paulette Irons ruled against Lloyd’s of London underwriters’ motion for a summary judgment and the suit’s dismissal.
Elsewhere, Cincinnati Insurance Company is appealing a North Carolina judge’s ruling that a group of Raleigh-Durham restaurants suffered a direct loss from coronavirus orders that their insurance policy covers.
“Plaintiffs were expressly forbidden by government decree from accessing and putting their property to use for the income-generating purposes for which the property was insured,” Judge Orlando Hudson wrote. “These decrees resulted in the immediate loss of use and access without any intervening conditions. In ordinary terms, this loss is unambiguously a ‘direct physical loss,’ and the Policies afford coverage.”
Also, a Philadelphia judge recently declined to dismiss a local pub’s lawsuit against Lloyd’s of London. The Tabs and Bourbon pub policy has a virus exclusion but claims loss of use due to governmental shutdowns. Lloyd’s of London has argued that the claim cannot be covered without direct physical loss or damage to the property.
According to the University of Pennsylvania’s Carey Law School COVID-19 litigation tracker, businesses had filed nearly 1,300 cases as of early October.
The general trend in coronavirus business interruption litigation is businesses who purchased policies without any virus exclusion have been winning against insurer motions to dismiss. Whereas insurers that issued policies with virus exclusions are winning a majority of the time.
“Bottom line: insurers are winning, overwhelmingly, when their policies have virus exclusions. But they are losing, at least at the motion to dismiss stage, when their policies do not have virus exclusions,” UPenn Law School Professor Tom Baker wrote in an October blog post.
Insurance Industry Instability
The insurance industry has been pushing back on the lawsuits and potential legislative action, saying it threatens the stability of the insurance sector.
In Cincinnati Insurance’s response to the North Carolina ruling, the company pointed to a letter from the state’s Insurance Commissioner Mike Causey.
“This type of loss could cripple the insurance industry causing many companies to fail, which would put the protection of homes, automobiles, and businesses at risk,” Causey wrote. “We can’t legally force insurers to cover a risk which they didn’t intend to cover and which, in some instances, was specifically excluded in the policy.”
In April, the American Property Casualty Insurance Association estimated that small firms’ business losses could total as much as $383 billion per month.
