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Insurers’ COVID-19 Notepad: What You Need to Know Now - Week of July 4, 2022

July 5, 2022

Courts Dismiss COVID-19 Business Interruption Claims

On July 5, 2022, the Court of Appeals of North Carolina reversed a trial court’s order granting a deli’s motion for partial summary judgment in connection with a COVID-19 business interruption claim. The court found that the provisions requiring direct physical loss or damage were unambiguous and that the deli’s alleged loss was not from physical harm to its property but rather from governmental orders. Order at 6. According to the appellate court, “Plaintiffs’ desired definition of ‘physical loss’ as a general ‘loss of use’ is not supported by our caselaw or the unambiguous language in the Policies.” Id. Instead, “only direct, accidental, physical loss or damage” is covered. Id. The case is North State Deli, LLC v. Cincinnati Insurance Co.

On June 24, 2022, the district court for the Southern District of New York granted Pacific Indemnity Company’s motion to dismiss a clothing boutique’s COVID-19 business interruption claim. Relying on the Second Circuit’s decision in Kim-Chee LLC v. Phila. Indem. Ins. Co. and the “unbroken line of trial court decisions” that “have ruled that the closure of businesses due to the suspected presence of the virus . . . do not qualify as direct physical loss or damage,” the court found that the boutique failed to allege a direct physical loss. Order at 10. The case is Kiton Corp. v. Pac. Indem. Co.

New Business Interruption Suits Against Insurers:

An aircraft designer sued North American Elite Insurance Company for declaratory judgment, breach of contract, and bad faith claim handling under Minnesota law in New York state court (Queens County). The company’s policy allegedly contained communicable disease coverage and time element coverage. Complaint ¶¶ 1–4, 22–23. The policyholder alleges that the employees who tested positive for the coronavirus were present on the property, which “is direct proof of the actual, not suspected presence of the Coronavirus.” Id. ¶¶ 32, 34.

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