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Insurers’ COVID-19 Notepad: What You Need to Know Now - Week of April 18, 2022

April 18, 2022

Courts Dismiss COVID-19 Business Interruption Claims

On April 14, 2022, the Supreme Court of Virginia denied several hotels’ petition for appeal based on “no reversible error.” Order at 1. The trial court had held that extensive allegations of the presence of the coronavirus did not constitute direct physical loss of or damage to property. Transcript at 86:15-87:1. The court also enforced a Contamination Exclusion, finding the word “irritant” was broad enough to encompass viruses. Id. at 87:3-13. Under Virginia procedure, the Supreme Court’s denial of a petition for appeal based on “no reversible error” is a decision on the merits. The case is Crescent Hotels & Resorts, LLC v. Zurich American Insurance Co.

On April 14, 2022, the U.S. Court of Appeals for the Fourth Circuit affirmed the dismissal of a developer’s COVID-19 business interruption claim. Relying on its decision in Uncork & Create LLC v. Cincinnati Ins. Co., 27 F.4th 926 (4th Cir. 2022) that coverage for business income did not apply to financial loss caused by the COVID-19 pandemic in the absence of any material destruction or material harm, the court found no reversible error in the district court’s dismissal of the Complaint. Opinion at 3. The case is Cordish Cos., Inc. v. Affiliated FM Ins. Co.

On April 12, 2022, the district court for the Eastern District of Michigan granted West Bend Mutual Insurance Company’s motion for summary judgment on a salon owner and operator’s COVID-19 business interruption claim. The court rejected the plaintiff’s claim for coverage under its policy’s communicable disease provisions because the relevant state civil authority order was not issued due to an outbreak of communicable disease at the plaintiff’s insured premises. Order at 12. The case is Salon XL Color & Design Grp., LLC v. West Bend Mut. Ins. Co.

On April 12, 2022, the Supreme Court of New York, Nassau County, granted Wesco Insurance Company, National Fire & Marine Insurance Company, and Certain Underwriters at Lloyd’s motions to dismiss a property owner’s COVID-19 business interruption claim. Noting there was “clearly established binding precedent” in numerous identical cases, the court concluded that the plaintiff failed to state a plausible claim for relief in the absence of any allegation of “real, tangible damage to or loss of property.” Order at 17.  The case is Lolli v. Wesco Ins. Co., et al.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Laura Foggan
Partner – Washington, D.C.
Phone: +1.202.624.2774
Email: lfoggan@crowell.com
Adam J. Singer
Associate – Washington, D.C.
Phone: +1.202.688.3508
Email: asinger@crowell.com
Rachel A. Jankowski
Associate – Washington, D.C.
Phone: +1.202.624.2647
Email: rjankowski@crowell.com
Samuel H. Ruddy
Associate – Washington, D.C.
Phone: +1.202.624.2564
Email: sruddy@crowell.com