Insurers’ COVID-19 Notepad: What You Need to Know Now - Week of October 24, 2022

Courts Dismiss COVID-19 Business Interruption Claims

On October 20, 2022, the Ninth Circuit affirmed the dismissal of a dental office’s COVID-19-related business interruption complaint. Relying on Hill & Stout, PLLC v. Mutual of Enumclaw Insurance Co., 515 P.3d 525, 532 (Wash. 2022), the court held that the district court did not err in finding no coverage for the business losses under the “direct physical loss” provision. Order at 2–3. The court also held that the insurer owed no civil authority coverage because it failed to colorably allege that the governor entered his orders to respond to physical property damages. Id. at 3. The case is Shokofeh Tabaraie DDS, PLLC v. Aspen American Insurance Co.

On October 17, 2022, the Ninth Circuit affirmed the dismissal of several dental offices’ COVID-19-related business interruption complaint.  Relying on Hill & Stout, the court held that the district court did not err in finding no coverage for the business losses under the “direct physical loss” provision. Order at 2-4. The court also affirmed the dismissal of plaintiffs’ claims for bad faith, negligence, and consumer protection act violations because the plaintiffs failed to show any unreasonable denial of coverage. Id. at 4. The case is Kara McCulloch, DMD, MSD, PLLC v. Valley Forge Ins. Co.

On October 17, 2022, the Ninth Circuit affirmed the dismissal of several dental offices’ COVID-19-related business interruption complaint.  Relying on Hill & Stout, the court held that the district court did not err in finding no coverage for the business losses under the “direct physical loss” and civil authority provisions. Order at 2-3. The court also found the virus exclusion in plaintiff’s policy barred coverage. Id. at 4. The case is Caballero v. Mass. Bay Ins. Co.

On October 17, 2022, the Ninth Circuit affirmed the dismissal of a yoga studio’s COVID-19 business interruption claim. Relying on the Supreme Court of Washington’s decision in Hill & Stout, PLLC v. Mut. of Enumclaw Ins. Co., 515 P.3d 525 (Wash. 2022), the court concluded that the yoga studio was not entitled to coverage because losses due to COVID-19 closure orders do not qualify as “direct physical loss of or damage to” property. Opinion at 2-3. The court further found that the policy’s virus exclusion barred coverage, because “COVID-19 initiated the causal chain that led to . . . the cause of any alleged loss of use.” Id. at 4. The case is Hot Yoga Inc. v. Phila. Indem. Ins. Co.

On October 12, 2022, the district court for the District of New Jersey granted AmGUARD Insurance Company’s motion to dismiss a restaurant operator’s COVID-19 business interruption claim. The court found a virus exclusion unambiguously barred the plaintiff’s claim. Order at 5. The court also rejected the plaintiff’s argument that regulatory estoppel barred the defendant from relying on the virus exclusion because the plaintiff did not identify any inconsistency between insurance industry representations to regulators and the defendant’s interpretation of the exclusion. Id. at 6. Similarly, the court rejected the plaintiff’s argument that the exclusion violated “general public policy” because the plaintiff did not identify any applicable public policy, and, in any event, policy considerations only applied where a policy was ambiguous. Id. at 7. Finally, the court found the plaintiff failed to state a claim under the business income, extra expense, and civil authority provisions of its policy because the plaintiff failed to identify any physical loss or damage to its property. Id. at 7-10. The case is BPC Restaurant Mgmt. v. AmGUARD Ins. Co.

New Business Interruption Suits Against Insurers:

The owners of boutique hotels in Miami Beach, Florida sued Certain Underwriters at Lloyd’s, London and HDI Global Specialty SE in Florida state court (Miami-Dade County) for declaratory relief and breach of contract. The policy allegedly provides business interruption and extra expense coverage. Complaint at ¶ 17. The Complaint alleges that COVID-19 closure orders caused the plaintiffs to suffer “physical damage that caused a delay in the resumption of hotel operations and an associated loss of business income from and after the nominal date that Miami-Beach permitted the Insureds’ hotels to ‘reopen.’” Id. at ¶ 15. The case is Museum Walk Apartments LLC, et al. v. Certain Underwriters at Lloyd’s, London, et al.

A builder sued American Alternative Insurance, Corporation; Allianz Global Risks US Insurance Company; Lexington Insurance Company; and Liberty Mutual Insurance Company for breach of contract in Michigan state court (Eaton County). The builder had builders risk insurance policies with each insurer. Complaint ¶ 8. The builder alleged that the coronavirus was presumed to be present at its site, and thus all work on its project was halted, causing it losses and forcing it to pay extra expense. Id. at ¶¶ 24, 26. Because the insurers denied its claims, the company alleges that it has breached their insurance contracts. Id. at ¶ 31. The case is Lansing Board of Water & Light v. American Alternative Insurance, Corp.