The COVID-19 pandemic has caused massive disruption and losses to businesses across the country.  Recent spikes in cases have prompted some governors and local governments to reinstitute lock-downs or halt re-opening plans.  With politicians failing to pass new stimulus measures, many businesses are turning to their commercial insurance policies for relief.  Specifically, many businesses maintain insurance coverage for business disruption and business income losses caused by physical loss and/or damage to the business.  Many businesses and insurers are faced with the question of whether losses caused by COVID-19 and the government imposed lockdowns are covered losses.

On September 9, 2020, my colleague, Emily Belanger, published an article discussing a decision from the Western District of Missouri which denied a Motion to Dismiss a lawsuit brought by business owners against their insurer for coverage for COVID-19-related business losses.  The Court in that case found that Plaintiffs adequately alleged that COVID-19 caused a direct physical loss to the business, which was covered under the claimant’s insurance policy.  See Studio 417 v. Cincinnati Ins. Co., No. 20-cv-03127-SRB, 2020 US. Dist. LEXIS 147600 (W.D. Mo., Aug. 12, 2020).  However, since that decision, the majority of jurisdictions considering the same or similar issues have reached the opposite conclusion.  The United States District Court for the Southern District of West Virginia found “[t]he majority of courts to address the issue, however, have found that COVID-19 and governmental orders closing businesses to slow the spread of the virus do not cause physical damage or physical loss to insured property.”  Uncork & Create, LLC v. Cincinnati Ins. Co., No. 2:20-cv-000401, 2020 U.S. Dist. LEXIS 204152 (S.D. W Va., Nov. 2, 2020); see also Diesel Barbershop, LLC v. State Farm Lloyds, No. 5:20-cv-461-DAE, 2020 U.S. Dist. LEXIS 147276 (W.D. Tex., Aug. 13, 2020).  However, the appellate courts have not ruled on these issues, and trial level courts continue to take opposing positions. 

Many insurance policies also contain policy exclusions for losses caused by virus or bacteria (“Virus Exclusion”).  The Virus Exclusion presents another hurdle for business-owners seeking to establish insurance coverage.  However, some jurisdictions have found that a Virus Exclusion does not necessarily preclude coverage under certain circumstances.  See Urognyecology Specialist of Fla., LLC v. Sentinel Ins. Co., No. 6:20-cv-1174-Orl-22EJK, 2020 U.S. Dist. LEXIS 184774 (M.D. Fla., Sept. 24, 2020).

Whether business losses caused by COVID-19 and/or government imposed lock-downs is a covered loss under a commercial insurance policy remains hotly disputed.  DeCaro Doran will continue to monitor developments in how courts handle this topic so that we can continue to provide effective and efficient representation to clients who may be faced with this issue.