Insurers’ COVID-19 Notepad: What You Need to Know Now - Week of July 11, 2022

Courts Dismiss COVID-19 Business Interruption Claims

On July 7, 2022, the Eighth Circuit affirmed the grant of judgment on the pleadings to Hartford Casualty Insurance Company on several dental and orthodontic practices’ putative COVID-19 business interruption class action. The court found that “Plaintiffs limited their services as a precautionary measure,” and they therefore “have not alleged physicality.” Opinion at 2. The case is Robert Levy, D.M.D., LLC v. Hartford Casualty Ins. Co.

On June 21, 2022, the Superior Court of New Jersey, Appellate Division, affirmed the grant of summary judgment to Hartford Fire Insurance Company in a country club’s COVID-19 business interruption claim. Relying on its opinion in Mattdogg, Inc. v. Phila. Indem. Ins. Co., the court found no basis to reverse the trial court’s grant of summary judgment. Opinion at 14-15. The case is Rockleigh Country Club, LLC v. Hartford Ins. Grp., et al.

On June 28, 2022, the Eighth Circuit affirmed the dismissal of a hotel, restaurant, and conference center developer and operator’s COVID-19 business interruption claim. The court held that “the cause of [plaintiff’s] business interruption—governmental orders alone—is not a direct physical loss.” Opinion at 4. The case is Torgerson Props., Inc. v. Continental Cas. Co.

On June 23, 2022, the Eleventh Circuit affirmed the dismissal of a go-karting and arcade business’s COVID-19 business interruption claim. The court held that under its precedents, “the presence of COVID-19 is not a tangible harm.” Opinion at 5. The case is AIKG, LLC v. The Cincinnati Ins. Co.

On June 8, 2022, the Second Circuit affirmed the dismissal of a dental practice’s COVID-19 business interruption claim. The court found that the policy unambiguously requires loss or damage be physical and that loss of use is not enough. Order at 3. Additionally, the plaintiff’s allegations that the coronavirus causes physical loss or damage through its transmissibility “fails to allege how the preens of those virus-transmitting particles tangibly alter or impact the property.” Id. The case is Farmington Village Dental Associates, LLC v. Cincinnati Insurance Co.

On June 6, 2022, the Seventh Circuit affirmed the dismissal of a limousine company’s COVID-19 business interruption claim. The court reasoned that “we have already held that” the presence of COVID-19 on a business’s premises “is insufficient” to state a claim for covered physical loss. Opinion at 2. The case is Windy City Limousine Co. v. Cincinnati Fin. Corp.

On June 3, 2022, the First Circuit affirmed the dismissal of several restaurants’ COVID-19 related business interruption complaints. The court said the Massachusetts Supreme Judicial Court’s decision in Verveine Corp. v. Strathmore Insurance Co., 184 N.E.3d 1266 (Mass. 2022) foreclosed the restaurants’ arguments. The court also said the plaintiffs did not allege in their complaint that either the virus has more than mere “evanescent presence” or that contaminated surfaces are “not susceptible of being redressed through ‘simple cleaning.’” The case is American Food Systems, Inc. v. Fireman’s Fund Insurance Co.

New Business Interruption Suits Against Insurers:

A Native American tribe sued Affiliated FM Insurance Company in Washington state court (King County) for declaratory judgment, breach of contract, insurance bad faith, and alleged violations of the Washington Consumer Protection Act and Insurance Fair Conduct Act. Plaintiff’s policy allegedly provides communicable disease property damage and business interruption, civil authority, and decontamination cost coverage. Complaint at ¶ 3.5. The complaint alleges AFM acted in bad faith by failing to reimburse Plaintiff for its COVID-19 losses “based on unreasonable, frivolous, or unfounded interpretations of [plaintiff’s] Policy.” Id. at ¶¶ 4.3-4.4. The case is Swinomish Indian Tribal Cmty. v. Affiliated FM Ins. Co.

An Indian tribe sued Lexington Insurance Company, Certain Underwriters at Lloyd’s London, Underwriters at Lloyd’s London—Aspen Specialty Insurance Company, Homeland Insurance Company of NY (One Beacon), Hallmark Specialty Insurance Company, Endurance Worldwide Insurance Ltd. t/as Sompo International, Arch Specialty Insurance Company, Evanston Insurance Company, and Allied World National Assurance Company for breach of contract, breach of the covenant of good faith and fair dealing, and declaratory relief in the Minnesota state court (Carlton County). The company alleged that the coronavirus “created inherently dangerous conditions where the Plaintiff’s businesses and property within them were at immediate and imminent risk of exposure to the Coronavirus,” which rendered the property “untenantable” and forced it to close. Complaint ¶ 40. The case is Fond du Lac Management, Inc. v. Lexington Insurance Co.

A law firm sued Continental Casualty Company in Louisiana state court (Orleans Parish) for improperly denying its claim. Complaint ¶ 19. It alleged that the virus was present on the property causing it to “sustain actual loss of business income.” Additionally, the virus in the surrounding community and subsequent shutdown orders also allegedly caused the firm direct physical loss of or damage to property. Id. ¶¶ 22, 24. The case is Gertler Law Firm, L.P. v. Continental Casualty Co.