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The Show Must Go On: Federal Court Allows Cinemark's COVID-19 Business Interruption Claims to Continue Where COVID-19 Allegedly Changed the Air in its Theaters

Policyholders that are still fighting their insurers for COVID-19 business interruption losses will want to take note of a recent policyholder win, this time from a federal court sitting in Texas. In Cinemark Holdings v. Factory Mutual Insurance, the court rejected the insurer’s argument that the case should be dismissed as Cinemark theaters did not sufficiently allege “physical loss or damage” in their claims. Significantly, the court noted, Cinemark alleged that COVID-19 had actually entered the theaters and damaged the property by changing the content of the air. The court reasoned these allegations were sufficient, and they made the case distinguishable from other suits where the business merely alleged their business had been interrupted from government shutdowns. Also, the court rejected the insurer’s argument that a contamination exclusion would bar coverage for the claims, noting the policy at issue expressly covered loss and damage caused by communicable disease. 

Cinemark’s “W” in federal court is notable because, by and large, federal courts have been insurer-friendly forums on these coverage issues, dismissing policyholder’s COVID-19 business interruption claims at a rate of about 90%, according to data that is continuously being tracked and updated by University of Pennsylvania. In contrast, policyholders in state court have fared better – surviving insurers’ motion to dismiss in about 42% of cases thus far.

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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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