An Orlando doctor is one of them. Dr. Christopher Walker’s policy for UroGyn Specialists of Florida contained a provision that Sentinel Insurance Co. contends excluded virus
claims. However, Dr. Walker argued that the language in the contact was ambiguous. A federal judge agreed and kept the case alive, rejecting Sentinel’s attempt to dismiss the lawsuit.
Dr. Walker’s lawyer said, “This insurance is make-or-break for a lot of businesses. People like my client paid for coverage for these kinds of losses and it isn’t right that insurers don’t want to pay”.
Many businesses will live or die depending on whether they can win their claims against the companies that insured them. U.S. bankruptcies have exploded following the lockdowns. Hertz Global Holdings Inc., the huge rental car company, said it couldn’t survive after its insurer, Century 21 Stores, denied its business-interruption claim.
Some insurers have also argued that they will go bankrupt if they pay off Covid-19 business interruption claims. In the second quarter following the first shutdowns, Chubb Ltd. reported $1.16 billion in Covid-19 losses. Munich Re said this last month that coronavirus losses continue to mount. Lloyd’s of London predicted in May 2020 that the insurance industry could face at least $100 billion in total underwriting losses from the pandemic.
Insurance Industry Losses
Insurance industry executives say pandemic-related losses could be their largest ever. Business-interruption claims will likely play a part
in those losses, despite the fact that many insurers quietly added virus exclusions to policies following the SARS outbreak of 2003.
Most cases which judges have tossed so far contained virus exclusions in their contracts. In cases where policies don’t have virus exclusions, insurers have argued that Covid-19 can’t cause physical damage or loss, which are needed to trigger a business-interruption payout. The Insurance Information Institute reports that the industry is winning dismissals with that argument. However, some plaintiff’s attorneys have found, or are still finding ways, where physical damage or loss can be construed to have occurred without some direct and obvious damage to a building or a business, such as that which occurs in a hurricane or fire.
A September 2020 win by Farmers Insurance Exchange in California shows how some judges interpret “physical loss or damage”. A federal judge in that ruling concluded that a barbershop chain could not show its business suffered a “distinct, demonstrable physical alteration”. That was the judge’s language. In this litigation, words and their definitions matter, a lot.
Virus Exclusions protect Insurance Companies
Other businesses, including Major League Baseball, have also pitched their insurance claims with virus exclusions to judges, who, unfortunately for the ball teams, knocked those claims out of the courtroom.
MLB Strikes Out
On Nov. 13, 2020, in Arizona, a federal judge ruled that a Cincinnati Reds Class AA minor-league affiliate, the Chattanooga Lookouts, along with more than a dozen other teams, had struck out due to contractual virus exclusions. In Los Angeles, the famous Musso & Frank Grill (founded 1919) lost its business-interruption claims over a virus exclusion.
All-Risks Policies offer Hope for Businesses
However, not all policy holders are striking out in court. In August 2020, a Missouri federal judge ruled that jurors should be able to decide if Cincinnati Financial Corp. should pay for coronavirus losses claimed by a group of restaurants and hair salons under a so-called “all-risks” policy. The judge said the virus made their properties “unsafe and unusable, resulting in direct physical loss to the premises and property”.
Cincinnati Financial officials said in an email that the “court should ultimately enforce the language of our policy contract. Our commercial property insurance policies require direct physical damage or loss to property and do not provide coverage in this case”.
Ambiguity of Language in the Exclusion
A Penn law professor, Tom Baker, who is tracking more than 1,300 business-interruption cases, said the Orlando gynecologist’s case could indicate a potential strategy for other claims by attacking the ambiguity of language in the exclusion. Any ambiguity in insurance contract language is supposed to favor the insured, because an insurance company is responsible for the language it uses.
U.S. District Judge Anne Conway ruled in the Orlando doctor’s case that the exclusion wasn’t precise enough when it barred claims caused by “the presence of fungi, wet rot, dry rot, bacteria or virus”. Judge Conway said that denying coverage for Covid-19 losses “does not logically align” with the “other pollutants” that the “policy necessarily anticipated and intended to deny coverage for these kinds of business losses”.
Lockdown Orders trigger coverage?
Other lawyers have argued that state lockdown orders can be used to show how the virus physically damaged their clients’ businesses.
That particular approach has been hit and miss for plaintiffs so far. The argument would seem to have merit, but it has not generally worked with judges so far. To show how a virus caused actual, physical damage.
Despite many setbacks, businesses continue to sue their insurers over Covid business interruptions.
“We continue the fight for businesses,” said attorney David Matthews, whose Houston-based law firm represents several large and small businesses nationwide. “Our clients have paid expensive premiums for too many years to be denied coverage when they need it most.”