Recent cases involving insurance companies against insured businesses seeking COVID-19 business interruption coverage could be of great importance due to the decisions’ focus on the impact of the virus as well as the expectations of a reasonable insured. A Missouri Court in Blue Springs Dental Care v. Owners Ins. Co. examined the “direct physical loss of or damage to” language that is present in many business interruption policies when it ruled on a suit brought by dental clinics seeking coverage for COVID-19 related business losses.
The insureds in Blue Springs Dental Care claimed that COVID-19 was present on their properties and caused physical loss or damage because it was “likely that customers, employees or visitors at the insured property were infected with the virus.” The clinics suspended operations to prevent the possible spread of COVID-19 to staff and patients. The Blue Springs Dental Care court agreed with the insureds, concluding that the insured plausibly alleged that COVID-19 physically attached itself to the clinics, thereby depriving the businesses of possession and use of those properties. The court reasoned that even partial interruption of business is evidence enough to state a claim for COVID-19 business interruption coverage.
The Court in Urogynecology Specialist of South Florida v. Sentinel Ins. Co., faced a similar COVID-19 business interruption coverage claim relating to closure of its facilities stemming from an executive order issued by the governor of Florida. The insurers in Urogynecology Specialist filed a motion to dismiss the suit, arguing that the policies “virus” exclusion barred coverage for the insureds losses. The policy specifically excluded coverage for losses caused by “the presence, growth, proliferation, spread or any activity of fungi, wet rot, dry rot or virus.” The court denied the motion to dismiss and indicated that it would not make decisions on merits of the plain language of the policy in order to determine whether or not the Plaintiff’s losses were covered. The court distinguished the matter from previous pollutant-based business interruption cases, reasoning that denying coverage for COVID-19 losses “does not logically align with the grouping of the virus exclusion with other pollutants such that the Policy necessarily anticipated and intended to deny coverage for these kind of business losses.”
These two decisions are big wins for insured businesses and could present challenging precedent for insurers relying on the argument that the “physical loss of or damage to” language, common in business interruption policies, requires a physical modification to the premises. Insurers should take note that they may not be able to rely on the plain language of virus exclusion provisions within their policies.
For more information on how these decisions can affect you and your business, contact the attorneys at Rock Fusco & Connelly, LLC.