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Business Interruption Coverage for COVID-19: Recent Pro-Policyholder Decisions

Since the COVID-19 pandemic began earlier this year, policyholders have filed over a thousand lawsuits against their insurance carriers seeking coverage for business interruption losses caused by the coronavirus or resulting stay-at-home orders.  While many courts have dismissed these suits on the ground that there is no “direct physical loss or damage” to property, the tide may be starting to turn.  Twice in the past three months policyholders have won partial summary judgment in cases seeking business interruption coverage for losses caused by stay-at-home orders:

  • On October 9, 2020, in North State Deli LLC, et al. v. Cincinnati Insurance Company, et al., Case No. 20-CVS-02569, the State of North Carolina General Court of Justice, Superior Court Division, County of Durham, granted plaintiff’s motion for partial summary judgment that its policies provide coverage for Business Income and Extra Expenses for plaintiff’s loss of use and access to its property due to government orders. The court held that the policy’s undefined terms “physical loss” and “physical damage” have distinct and separate meanings, and that the phrase “direct physical loss” includes the inability to utilize or possess something.
  • On November 23, 2020, in Perry Street Brewing Company LLC v. Mutual of Enumclaw Insurance Company, Case No. 20-2-02212-32, the Superior Court of the State of Washington for Spokane County granted PSBC’s motion for partial summary judgment. The court held that the interruption of PSBC’s business operations as a result of the Governor’s COVID-19-related proclamations “was a direct physical loss of PSBC’s property because PSBC’s property could not physically be used for its intended purpose, i.e., PSBC suffered a loss of its property because it was deprived from using it.”  Like the court in North State Deli, the PSBC court reasoned that the policy’s undefined terms “loss of” property and “damage to” property are distinct from one another, that “physical loss means something other than damage,” and that the dictionary definition of “loss” includes “deprivation.”

In addition, policyholders seeking business interruption coverage for COVID-19-related losses have defeated insurer motions to dismiss over a dozen times since August:

Case Name Court Case Number Date of Order
Elegant Massage, LLC v. State Farm Mutual Automobile Insurance Company United States District Court for the Eastern District of Virginia 2:20-cv-00265-RAJ-LRL December 9, 2020
JGB Vegas Retail Lessee, LLC v. Starr Surplus Lines Insurance Company District Court, Clark County, Nevada A-20-816628-B November 30, 2020
Dino Palmieri Salons, Inc. v. State Automobile Mutual Insurance Company Ohio Court of Common Pleas, Cuyahoga County CV-20-932117 November 17, 2020
Hill and Stout PLLC v. Mutual of Enumclaw Insurance Company Superior Court of the State of Washington, King County 20-2-07925-1 SEA November 13, 2020
Independence Barbershop LLC v. Twin City Fire Ins. Co. United States District Court, Western District of Texas 1:20-cv-00555-JRN November 4, 2020
Taps & Bourbon on Terrace, LLC v. Underwriters at Lloyds, London and Main Line Insurance Offices, Inc. In the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania, Civil Trial Division 20093025 October 26, 2020
Chapparells Inc. v. Cincinnati Insurance Company Ohio Court of Common Pleas, Summit County CV-2020-06-1704 October 21, 2020
Lombardi’s, Inc. et al v. Indemnity Insurance Company of North America In the District Court of Dallas County, Texas, 14th Judicial District DC-20-05751 October 15, 2020
Francois Inc. v. Cincinnati Insurance Company In the Court of Common Pleas, Lorain County, Ohio 20CV201416 September 29, 2020
Urogynecology Specialist of Florida LLC v Sentinel Insurance Company, Ltd. United States District Court, Middle District of Florida 6:20-cv-01174-ACC-EJK September 24, 2020
Johnston Jewelers, Inc. v. Jewelers Mutual Insurance Company, S.I. In the Sixth Judicial Circuit in and For Pinellas County, Florida, Circuit Civil Division 20-002221-CI September 22, 2020
Blue Springs Dental Care, LLC v. Owners Ins. Co. United States District Court, Western District of Missouri 20-CV-00383-SRB September 21, 2020
Ridley Park Fitness, LLC v. Philadelphia Indemnity Insurance Company In the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania, Civil Trial Division 200880358 August 31, 2020
Optical Services USA/JC1 et al v Franklin Mutual Insurance Company Superior Court of New Jersey, Law Division, Bergen County BER-L-3681-20 August 13, 2020
K.C. Hopps, Ltd. v. Cincinnati Insurance Company United States District Court, Western District of Missouri 20-CV-00437-SRB August 12, 2020
Studio 417, Inc. v. Cincinnati Insurance Company United States District Court, Western District of Missouri 20-CV-03127-SRB August 12, 2020

While court rulings will vary case-by-case based on applicable state law, the precise language of the policy at issue, and the factual circumstances surrounding the loss, these above decisions demonstrate that no policyholder should assume or accept that “there is no coverage” without a thorough review by coverage counsel.

The information contained in this document is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.

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Lathrop GPM is one of the largest law firms in the United States representing policyholders, providing policyholders with the necessary guidance and legal counsel to handle everything from negotiating coverage and managing risk to litigating insurance disputes and recovery. The Road to Insurance Recovery blog is dedicated to helping readers better understand and manage the complexities of the modern business insurance policy.
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