Most business owners carry business interruption insurance. After all, bad things can happen when we least expect it, and this type of insurance can help you carry on. When any event disrupts your business, you expect it to trigger your coverage. Disputes between insurance companies and their insured often arise, however. The recent COVID-19 shutdowns have brought these disputes to the forefront as business owners learn that insurers do not agree with their assessment that their insurance covers damages incurred because of the pandemic. In fact, some cases have already reached the courts.
“Direct Physical Loss” or Not?
The plaintiffs in Rose’s 1 LLC, et al. v. Erie Insurance Exchange owned restaurants in Washington, D.C. During the coronavirus pandemic, the D.C. mayor ordered that non-essential businesses like these were to be closed. The plaintiffs filed claims for damages with their insurance company, Defendant Erie Insurance Exchange. Their policies stated they were insured “against direct physical ‘loss.’”
The District of Columbia Court rejected the plaintiffs’ claims that they suffered ‘physical’ loss because of the mayor’s shutdown orders. Granting the insurer’s cross-motion for summary judgment prevented plaintiffs from continuing their lawsuit.
In part, this decision came about because plaintiffs could not prove that COVID-19 existed in their restaurants. However, recent studies show that the virus can live on surfaces for some time and can be airborne.
Other plaintiffs with business interruption insurance disputes received better news from the courts.
Backing Business Owners in Business Interruption Insurance Dispute
A recent decision by a Missouri court may affect current and future business interruption insurance lawsuits.
In Studio 417, Inc., et al. v. The Cincinnati Ins. Comp., plaintiffs sued their insurer for breach of contract and declaratory judgment. The plaintiffs claimed pandemic-related damages, including lost income, but their insurer disagreed. Unlike the plaintiffs in Rose’s 1, LLC, the Studio 417 plaintiffs alleged that COVID-19 was a physical substance that caused their business losses.
The court relied on definitions of “direct,” “physical,” and “loss” in making its decision. Specifically, the court found that the plaintiffs provided sufficient evidence that the virus made their premises “unsafe and unusable.” As such, plaintiffs proved direct physical loss caused their damages, and their business interruption dispute was allowed to proceed.
Numerous cases involving business interruption coverage are already in progress nationwide. Also, there’s a real possibility that plaintiffs will file more cases in the coming days. The Missouri Court’s decision may establish a pathway for insureds to recover for their coronavirus-related damages.
Litigation Is Sometimes Necessary to Deal with Business Interruption Insurance Disputes.
Insurance companies and their insured don’t always see eye-to-eye on coverage. If you and your insurer have a business interruption insurance dispute, contact an attorney right away. Negotiations might help the situation, or you may turn to mediation or litigation.
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.