We previously wrote about the growing number of lawsuits by insureds seeking business interruption insurance coverage for business losses in response to the novel coronavirus (here and here), and the constraints that state and federal governments should face were they to compel such coverage. We also previously detailed nationwide efforts aimed at enacting legislation compelling business interruption and contingent business interruption insurance for COVID-19 losses. As of the date of this update, eight states have proposed a number of bills relating to business interruption insurance, and Congress has also waded in.
As the coronavirus cases start peaking in at least some parts of the United States, the American courts are beginning to experience mounting cases relating to claims against businesses for coronavirus infections and against insurers for alleged business interruption coverage. A few weeks ago, some well-known restaurants in the United States commenced litigation against their insurers over claims for insurance coverage stemming from business interruption. These individual cases will raise a number of issues whether there is direct physical loss to covered property and whether the virus exclusions in the policies bar coverage. As a host of other types of businesses have followed by filing a number of individual suits in several states against their insurers. Last week, however, a new form of litigation has been filed with multiple class action insurance coverage lawsuits being brought by alleged representatives against single insures who are claimed to have written business interruption policies to a number of businesses in given areas or nationwide.
The potential cost of business continuity losses is enormous. The Congressional Research Service issued a report to Congress on the financial impact to insurers for the cost of covering business interruption claims. The report explains that some industry sources estimate that the cost of covering business interruption claims ranges from $110 billion to $290 billion per month. In a more recent letter, insurance industry leaders explained, “recent estimates show that business continuity losses just for small businesses of 100 or fewer employees could amount to between $220 billion to $383 billion per month. Meanwhile, the total surplus for all of the U.S. home, auto, and business insurers combined to pay all future losses is only $800 billion.”
In the first of what will likely be an exponentially growing tide of businesses turning to insurance coverage for financial relief from the economic downturn caused by the global coronavirus pandemic and response, on March 17, 2020, a restaurant filed a lawsuit seeking business interruption insurance coverage for alleged losses caused by executive orders issued by Louisiana Governor John Bel Edwards. In Cajun Conti LLC, et al. v. Certain Underwriters, et al., the plaintiff-restaurant (“Oceana Grill”) filed its lawsuit seeking coverage under an alleged “all risks” commercial property insurance policy that Oceana Grill purchased from the defendant-insurer. Oceana Grill alleges that the policy provides “property, business personal property, business income and extra expense, and ordinance or law coverage” caused by “all risks” unless specifically excluded (unlike a “specified” or “named” “perils” policy, which provides coverage for loss resulting from specific, named risks).
To read the full text of this Duane Morris Alert, please visit the firm website.