Miller Friel, PLLC
This March marks the unofficial one-year anniversary of the ongoing COVID-19 pandemic, which has caused widespread financial ruin to businesses across the United States. In their hour of greatest need, thousands of these companies turned to their commercial property insurers—only to receive across-the-board coverage denials. Some policyholders filed coverage lawsuits, but by taking advantage of pleading deficiencies, insurers managed to score some early wins, which they used to support their false narrative that property policies do not cover business income losses due to the presence of the virus.
As months passed, more seasoned attorneys joined the mix and began filing better-pleaded complaints, which reversed the trend: courts began denying insurers’ motions to dismiss and granting summary judgment in favor of policyholders. Contrary to insurers’ claims, the wars over insurance coverage for COVID-19 claims haven’t ended—they’ve only just begun. In 2021, policyholders will continue to see more victories in this hotly contested area of insurance law.
Commercial property insurance policies typically provide coverage for “all risks” of “physical loss or damage” to the insured property. Critically for policyholders, commercial property policies also cover loss of business income. However, business income provisions typically require that “physical loss or damage” must cause the loss of business income. COVID-19 coverage disputes thus often present the threshold issue of whether the virus causes “physical loss or damage” to insured property.
When the pandemic began in earnest a year ago, many businesses felt the squeeze as government closure orders cut off their revenues. When these companies (many of them restaurants, hair salons, fitness centers, and other retail businesses) filed claims, their insurers told them they had no coverage. Plaintiffs’ law firms saw this as an opportunity to sign up COVID-19 policyholders and rushed to courthouses across the country to file lawsuits, often without regard to policy language.
In the early going, many policyholders failed to adequately plead “physical loss or damage” to their properties by
Predictable results followed, and insurers racked up a string of early wins. In the first reported COVID-19 coverage decision, Gavrilides Management Co. et al. v. Michigan Ins. Co., a Michigan state court granted the
Many other policyholders’ early pleadings suffered from similar defects, resulting in similar outcomes. As the losses mounted, insurers began to claim victory, putting out a false narrative that courts across the country had reached a
As the pandemic continued to rage, more sophisticated policyholders began to enter the fray. These subsequent litigants corrected the shortcomings of their predecessors by filing
In addition to defeating insurer motions to dismiss, policyholders also began
Several decisions have now
In the early stages of COVID-19 coverage litigation, insurers capitalized on the pleading mistakes of unsophisticated businesses and inexperienced lawyers to score a series of easy wins and claim victory. However, as more sophisticated businesses with more experienced attorneys joined the fold and began filing better-pled complaints, the trend reversed: policyholders began defeating insurer motions to dismiss and winning summary judgment outright. Contrary to the insurers’ narrative, many courts are now correctly interpreting “physical loss or damage” in policyholders’ favor. Stay tuned as these cases progress to the appellate level in 2021. The COVID-19 coverage wars aren’t over—they’ve only just begun.
For more information about various COVID-19 insurance coverage issues, check out Tae’s
Tae Andrews is an attorney at Miller Friel, PLLC, where he litigates complex insurance disputes in both state and federal courts. His practice focuses on advising corporate policyholders on insurance coverage issues arising under commercial general liability, directors and offices, professional liability/errors and omissions, excess, umbrella, and others.
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