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

July 18, 2022

Courts Dismiss COVID-19 Business Interruption Claims

On July 6, 2022, the Sixth Circuit affirmed the dismissal of a power-conveyance and energy-management company’s COVID-19 business interruption claim. The court concluded that the policy’s contamination exclusion barred coverage, finding that the “actual or suspected presence of a virus like COVID-19 on [the insured’s] property is contamination” under the plain policy language and that the insured’s claims were “exclusively based on damage and loss related to COVID-19, not other physical damage.” Opinion at 6. The court further rejected the insured’s contention that the contamination exclusion did not apply because it covers only “traditional environmental contamination,” concluding that the “definition of contamination here clearly encompasses the presence of COVID-19 and there is no indication the exclusion is limited to traditional environmental contaminants.” Id. at 8. The case is Dana Inc. v. Zurich Am. Ins. Co.

On July 7, 2022, the U.S. District Court for the District of Massachusetts granted Hartford Fire Insurance Company’s motion for summary judgment against a background check company’s COVID-19 business interruption lawsuit. The court held the company did not allege physical loss or damage from the COVID-19 related shutdown orders based on the Massachusetts Supreme Judicial Court’s decision in Verveine Corp. v. Strathmore Ins. Co., 184 N.E.3d 1266 (Mass. 2022). Order at 6. As for the policyholder’s attempt to distinguish the case from prior ones, the court found the distinction “meaningless because in each of these cases the insured was not entitled to coverage because its property was not physically affected either by the virus itself or by government directives related to the virus.” Id. at 11. Lastly, the court held the company “cannot manufacture an ambiguity where there is none,” even if other states’ courts found in favor of policyholders. Id. at 12. The case is Creative Services, Inc. v. Hartford Fire Insurance Co.

New Business Interruption Suits Against Insurers:

A bar sued Certain Underwriters at Lloyd’s of London in Louisiana state court (Orleans Parish) for declaratory judgment, breach of contract, and breach of duty under Louisiana law. The “all risk” policy allegedly contains business income, extra expense, and civil authority coverage and does not contain a virus exclusion. Complaint, ¶¶ 12–16. However, it does contain a mold and pathogens exclusion. Id. ¶ 17. The case is C. Napco, Inc. v. Certain Underwriters at Lloyd’s of London Subscribing to Policy No. NF23588.

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