Courts Dismiss COVID-19 Business Interruption Claims
On June 6, 2022, the Eighth Circuit affirmed the dismissal of a restaurant group’s COVID-19 business interruption claims. The court said that the restaurants did not plead any virus requiring removal from their properties. Order at 4. The court also rejected coverage under the civil authority provision because it requires a direct physical loss or damage to property, which the plaintiffs did not allege. Id. at 6. The case is Planet Sub Holdings, Inc. v. State Auto Property & Casualty Insurance Co.
On June 6, 2022, the Eleventh Circuit affirmed the dismissal of a clothing store’s COVID-19 business interruption complaint. The court held that neither the pandemic-related government shutdown orders nor a temporary loss of use qualifies as physical loss or damage. Order at 13. Additionally, according to the court, if a “surface can be cleaned and quickly restored to its previous condition, then the property has not suffered direct ‘accidental physical loss or accidental physical damage’ such that it has been tangibly altered.” Id. Applying the contract construction tools, the court said the “policy language here is not genuinely ambiguous because it can be understood by assigning the phrases at issue their ordinary meaning.” Id. at 12. The case is Dukes Clothing, LLC v. Cincinnati Insurance Co.
On June 6, 2022, the Eleventh Circuit affirmed the dismissal of several restaurant owner and operators’ COVID-19 business interruption claims. The court held the plaintiffs’ allegations of “reduced seating capacity and ‘property contamination due to the virus’” were insufficient to state claims for direct physical loss of or damage to property. Opinion at 6-7. The case is Rest. Grp. Mgmt., LLC v. Zurich Am. Ins. Co.
On June 3, 2022, the Seventh Circuit affirmed the dismissal of a jewelry business’ COVID-19 business interruption claim. The court found that its recent COVID-19 decisions controlled, wherein the court “has repeatedly held that ‘direct physical loss’ means tangible, physical alteration to property, not merely loss of use.” Opinion at 1. Moreover, the court concluded that, even if coverage did otherwise exist, “the allegations also fail to state a claim because the policy’s virus exclusion provision plainly applies.” Id. at 3. The case is ABC Diamonds Inc. v. Hartford Cas. Ins. Co.
On June 8, 2022, the Seventh Circuit affirmed a grant of judgment on the pleadings to West American Insurance Company on a restaurant owner and operator’s COVID-19 business interruption claim. The court held that “[a]s was the case for all of the businesses in the [other COVID-19] cases that we have considered, [the plaintiff] was clearly deprived of its intended use of the property at least temporarily, but it does not allege physical dispossession or physical alteration of the property sufficient to constitute ‘direct physical loss’ under the language of the policy.” Opinion at 4. The court also noted that, although it did not need to address whether the policy’s virus exclusion applied, “we have found identical [virus exclusion] language to exclude coverage in a pandemic-related challenge.” Id. at 4-5. The case is Melcorp, Inc. v. W. Am. Ins. Co.
On June 7, 2022, the Fourth Circuit affirmed the grant of summary judgment to Valley Forge Insurance Company in a COVID-19 business interruption claim filed by National Coatings & Supplies, Inc. and Single Source, Inc. Relying on its decision in Uncork & Create LLC v. Cincinnati Ins. Co., 27 F.4th 926 (4th Cir. 2022), the court found no reversible error in the district court’s decision. Opinion at 3. The case is Nat’l Coatings & Supplies, Inc., et al. v. Valley Forge Ins. Co.
On June 8, 2022, the Sixth Circuit affirmed the dismissal of various businesses’ COVID-19 business interruption claims against Cincinnati Insurance Company. Relying on its decision in Dakota Girls, LLC v. Phila. Indem. Ins. Co., 17 F.4th 645 (6th Cir. 2021), the court found coverage was unavailable because “the physical loss or damage contemplated by the policy is not the same as a loss of use due to the temporary, surface-level presence of a virus.” Opinion at 6-7. The case is Troy Stacy Enterprises Inc., et al. v. Cincinnati Ins. Co., et al.
On June 8, 2022, the Connecticut Superior Court (Hartford County) granted Factory Mutual Insurance Company’s motion to strike a casino’s complaint for COVID-19-related business interruption losses. The court said that the casino failed to allege operations ceased because of the “actual not suspected presence” of the coronavirus. Order at 12. The court was unpersuaded by the gaming authority’s contention that communicable diseases are covered under “physical loss or damage.” Id. at 9. The case is Mohegan Tribal Gaming Authority v. Factory Mutual Insurance Co.
For further information, please contact:
Laura Foggan, Partner, Crowell & Moring
lfoggan@crowell.com
