Tag Archives: business interruption

Panel Rejects Consolidation Of All Federal Business Interruption Cases

By Damon Vocke

On July 31, the seven-member Judicial Panel on Multi-District Litigation (JPML) heard oral argument of extraordinary length on the potential consolidation of all federal cases involving business interruption coverage relating to COVID-19 and/or COVID-19 shutdown orders, totaling approximately 449 such federal cases, roughly 200 of which are putative class actions. Continue reading Panel Rejects Consolidation Of All Federal Business Interruption Cases

Lengthy Oral Argument on Potential Consolidation of Business Interruption Coverage Cases Related to COVID-19

By Damon Vocke

On July 30, the Judicial Panel on Multi-District Litigation (the Panel) heard oral argument of extraordinary length on the potential consolidation of all the federal cases involving business interruption coverage relating to COVID-19 and/or the COVID-19 shut-down orders.  There are some 449 such federal cases, approximately 200 of which are putative class actions.

Normally, the arguments for consolidation are short.  This one was not.  This was likely due to the importance of the pandemic-related litigation, as well as the multiplicity of positions.

Several policyholder plaintiffs argued for national consolidation.  Insurer-specific consolidation was the most common fall-back position among the policyholder plaintiffs.  Several policyholder plaintiffs argued against any consolidation – most notably, David Boies.  Counsel for some of the insurer defendants argued on behalf of the industry against any consolidation. Continue reading Lengthy Oral Argument on Potential Consolidation of Business Interruption Coverage Cases Related to COVID-19

Business Interruption Insurance, COVID-19 and Direct Physical Damage under New York Law

By Damon Vocke and David T. McTaggart

To date, approximately 150 business-interruption insurance coverage lawsuits have been filed in federal courts arising from COVID-19 and related government-ordered restrictions.  In what appears to be the first substantive ruling on the merits in these cases, the Southern District of New York recently ruled against an insured who could not meet its burden to show a likelihood of success in establishing “property damage” due to the novel coronavirus to support its claim for injunctive relief.  See Social Life Magazine, Inc. v. Sentinel Ins. Co., 1:20-cv-03311-VEC (Dkt. 24-1, S.D.N.Y. May 14, 2020).  Judge Caproni expressed sympathy “for every small business that is having difficulties during this period of time,” but concluded that “New York law is clear” in requiring actual property damage to trigger business interruption coverage. Because the insured’s coverage theory rested on a government shutdown in the absence of any property damage, the Court denied its preliminary injunction motion, reasoning “this is just not what’s covered under these insurance policies.”

Continue reading Business Interruption Insurance, COVID-19 and Direct Physical Damage under New York Law

Life Interrupted: Coronavirus (COVID-19) and Insurance Coverage for Business Interruption

by Max H. Stern and Jessica E. La Londe

A key issue that many insurance companies will face in the upcoming weeks and months is whether their policies provide coverage for policyholders’ business interruption losses from the COVID-19 crisis.  This is not merely an academic question: the first coverage case on this issue was filed in Louisiana this week (Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s London, et al.) and legislatures are already considering legislation that may significantly impact the insurance industry (see New Jersey’s proposed legislation on insurance coverage for COVID-19 business interruption claims and letter from members of Congress to insurer trade groups encouraging the acceptance of business interruption coverage for COVID-19 losses).

As in every case, whether there is coverage for these losses will depend, in the first instance, on the policy language, which must be looked at closely.  The applicable law and specific facts will add layers of complexity to the issues.  Based on our experience with advising on and litigating coverage for business interruption losses, some of the following issues may be in play.

First, insurance companies will have to determine if the policy provides business interruption coverage at all (either in the policy form or by endorsement) and then whether the loss falls within the relevant scope of coverage.  This may include, for example, whether the timing of the business interruption loss triggers coverage (often, the business interruption must “commence” during the policy period) and whether the coverage applies when the source of the business interruption is unrelated to the policyholder’s property.

Second, some business interruption coverage may contain exclusions that apply to the losses suffered because of the COVID-19 crisis.  For example, in 2006 ISO adopted a “virus” exclusion for business interruption coverage (as a result of previous virus outbreaks, including SARS).  Other types of specialty policies may provide coverage that extends business interruption coverage to pollution or biological contamination, but they may be subject to communicable disease exclusions or other limitations.

Third, in our experience, novel business interruption claims need to be closely examined with respect to the nuts of bolts of the requirements for business interruption coverage, such as:

– Issues of proof, such as demonstrating the exact amount of loss over and above expenses, taxes, etc. that would have been incurred;

– Whether business interruption loss applies when there is a complete and total loss (as opposed to a mere “interruption”);

– The point at which true business interruption begins and ends;

– Notice/reporting issues; and

– Deductible/self-insured retention and policy limits issues.

The potential coverage issues in COVID-19 business interruption claims are varied and complex and may benefit from experienced coverage counsel.

For more information, please contact Max Stern (mhstern@duanemorris.com) or Jessica La Londe (jelalonde@duanemorris.com).