With the spread of Coronavirus Disease-2019 (COVID-19) and its devastating impact on public health and the global economy, you can expect to see a spike in insurance claims in the coming months. These claims will likely include those for business interruption and extra expense resulting from the loss of customers due to public health concern or mandatory closures. Notably, in order to trigger business interruption coverage there must be “direct physical loss of or damage to” covered property. This condition would not appear to be satisfied for losses due to a general decline in economic activity. However, the result may arguably be different where the loss results from the actual presence of the Coronavirus in a structure.
In a case filed earlier this week in Civil District Court for the Parish of Orleans, Louisiana, Oceana Grill sued its insurer seeking a declaratory judgment that its business interruption loss resulting from the Louisiana governor’s public gather restriction and New Orleans mayor’s restriction on restaurant operations is covered under an “all risks” property policy. According to the complaint, the Coronavirus “physically infects and stays on the surface of object or materials, ‘formites,’ for up to twenty-eight days, particularly in humid areas below eighty-four degrees” and it is “clear that contamination of the insured premises by the Coronavirus would be a direct physical loss needing remediation to clean the surfaces of the establishment.” Significantly, the complaint alleges that the policy does not contain an exclusion for loss due to virus or bacteria, as is found in many policies. This case could impact future determinations regarding Coronavirus coverage so it will certainly be one to watch.
We can also expect to see claims alleging insureds are responsible for failing to take proper precautions, allegedly causing others to contract the virus. Such a claim was made in a lawsuit filed in Florida earlier this month by Ronald and Eva Weissberger, alleging Princess Cruise Lines Ltd. lacked proper screening protocol to minimize the risk of exposure to passengers. Similar suits have since followed. These claims could potentially trigger coverage under CGL policies, but issues may arise as to whether the alleged injury was caused by an “occurrence”, or accident, and whether there is a single occurrence or multiple occurrences.
There will likely be a myriad of other types of claims arising out of the Coronavirus pandemic. Needless to say, it will be crucial for insurers to review the language of each policy carefully to determine whether or not the claimed losses or damages are covered.
This is our firm’s very early take on these issues in transition. The situation is so dramatic and uncertain right now that we cannot even rule out in this rare instance the extraordinary step of a governmental override of contracted for policy language.