By Lee S. Siegel and Ryan P. Maxwell*
The COVID-19 crisis is impacting businesses small and large across the country with virtually none spared. If not deemed an essential business, many policyholders have had operations suspended or, at best, greatly reduced over these last several weeks. Policyholders are increasingly looking to their Business Interruption coverage under first-party, property insurance policies for help. As national coordinating and lead counsel for several carriers, Hurwitz & Fine is tracking legislative initiatives and the dozens of lawsuits filed by policyholders seeking Business Interruption coverage. Below we highlight a few key takeaways from these recent developments.
Read Policies Carefully – Every Claim Is Unique
The early perception among insurance carriers and their counsel is that slowdowns and shutdowns due to COVID-19 are not covered under a typical property insurance policy. Many carriers have denied claims and posted information on their websites stating that COVID-19 is not property damage, which is regularly required to invoke Business Interruption coverage. We caution that not all policies provide the same terms and conditions, even among those issued by the same carrier; and, it must be remembered that each claim is unique, and each claim investigation should be handled accordingly. Read each policy. Investigate each loss and its surrounding circumstances. Do nothing summarily and decline the urge to shoot from the hip in order to issue quick coverage positions. Insurance policies and the claims that follow are not one size fits all. And, if after all that you find yourself uneasy, call a member of our COVID-19 insurance team and we can assist you in evaluating your policy’s coverage, your company’s best practices, and the policyholder trends. We have and will continue to assist carriers in navigating this COVID-19 coverage quagmire on individual claims and as national coordinating counsel.
COVID-19 Insurance Legislation
The Hurwitz & Fine Coverage Team has prepared a consolidated resource document comprised of legislative summaries for all proposed state and federal legislation to date concerning COVID-19 business interruption coverage. We will continue to maintain this document, so bookmark this page so you do not miss out on pertinent, timely information. The legislative landscape changes weekly, if not daily. To download our consolidated summaries, click here. Eight states, including New York, and some members of Congress have officially introduced bills that would require insurance companies to pay policyholders’ Business Interruption claims, regardless of the policy terms—some would even cancel out previously approved virus exclusions. These ideas have received quite a bit of opposition and none of the bills have been moved to a vote.
Not waiting for legislative help, we have identified and compiled a list of almost five dozen lawsuits by policyholders suing insurance companies demanding coverage for business income loss due to COVID-19. The rate at which these are being filed is increasing by the day, notwithstanding that many jurisdictions temporarily suspended the filing of new suits. Some of these lawsuits are even styled as national class actions and there is currently a push for formation of issue-specific MDL procedures at the JPML. Check to see if one of these is against your carrier. These lawsuits canvas the country but we’ve discerned a few commonalities. First, the plaintiffs describe themselves as non-essential businesses. Second, the business mostly had “all risk” property policies. Third, the businesses sustained almost complete if not total impact on their operations as a result of local and state social-distancing and stay-at home orders. And, fourth, almost all allege that COVID-19 caused property damage, some under the “fomite formation” theory.
Hurwitz & Fine continues to monitor and analyze the legal and legislative initiatives surrounding these issues and provide regular updates to our clients. Please contact any member of our Insurance Coverage Team for guidance on business interruption claims or other concerns. Remember: although the focus today is on business interruption—it is not too late to strategically plan ahead to ensure proper navigation for the flood of COVID-19, third-party liability claims that will follow in its wake.
*Lee S. Siegel, a partner, and Ryan P. Maxwell, an associate, are members of the Hurwitz & Fine, P.C. Coverage Team and its COVID-19 Legal Response Team, providing coverage and business advice arising out of the COVID-19 pandemic.