Lawsuits Over Business Interruption Coverage Have Begun

Apr 22, 2020

As outlined in my last post, the fight between insurance companies and insureds over business interruption, and the interpretation of language in consumer general liability policies, has begun.  The issues are as characterized in my last post:

The first significant lawsuits filed in California was filed by attorney Mark Geragos and his firm seeking coverage for several small businesses.  In response, Travelers Insurance Company has filed a Complaint for Declaratory Relief requesting that the Court interpret Geragos’ firm’s policy to deny coverage for business interruption (USDC Case No. 2:20-cv-03619).  The firm had made a claim to Travelers asserting that its business has suffered a covered loss due to the firm being closed due to COVID-19.  The issues raised by Travelers track the same issues highlighted in my last post, namely, according to the complaint, the Travelers insurance policy only covers “physical loss” or damage to the property that results from a covered cause under the policy. Travelers argues that the presence of the coronavirus does not cause physical damage.  Travelers further argues that while the policy includes an endorsement for damage caused by civil authority orders, that clause also depends on there being “direct physical loss of or damage to” property.  In essence, since the damage to the business was not due to a physical loss, there is no coverage.

Travelers also alleges that the policy includes an exclusion for loss “due to virus or bacteria,” which bars coverage even if the business shutdown somehow could be considered “physical loss.”

We continue to monitor the arguments being made, as well as the other political responses to insureds arguments regarding relief and coverage.  Both the Courts and the governments are still in the early stages of figuring out how best to provide businesses with relief.  In the meantime, we recommend you get organized, get your policies together, gather your documents, and DON’T WAIT to submit claims to your insurance company.  And as always, consult an attorney expert in insurance matters if you have any questions or need assistance.