Insurers not out of danger due to COVID BI’s ‘forest fires’

Insurers not out of danger due to COVID BI’s ‘forest fires’

Insurers have so far had broad success arguing that COVID did not result in physical damage to buildings, although there were outliers that threatened to upset the balance.

Read more: Insurers win the most COVID-19 business disruption lawsuits

In July, a Louisiana court of appeals overturned a lower court ruling in favor of restaurant operator Oceana Grill, which is suing some Lloyd’s insurers to compensate for B’s losses.

The Court of Appeal went so far as to say that the lower court had “committed a legal error” and “abused its discretion” in rejecting the declaratory judgment.

“For the foregoing reasons, we rescind the lower court ruling and hold that coverage exists for loss or damage caused by “direct physical loss or damage to the insured premises of the Appellants” as a result of contamination by COVID-19,” the Court of Appeals proceeded.

Also in July, the Marina Pacific Hotel Suites saw some success in its case against the Fireman Trust by arguing that COVID can physically attach to and alter surfaces it touches. The second California District Court overturned the objection, concluding that the claimants “defended beyond doubt for direct material loss or damage to the covered property.”

These aren’t the only cases where the courts have gone against the public trend, but some of the earlier “fires” have already been put out – as described by William Stewart, attorney and contributor to Stewart Smith.

“What initially happened was that there were several instances, like kind of popping popcorn,” Stewart said.

“You hear one pop, then another pop, and then all of a sudden you hear pop, pop, pop, pop, pop — that’s kind of what was going on with these decisions, and they were all going the insurance company route. “

At times, cases in North Carolina, Virginia, Missouri and Illinois seemed to move in favor of policyholders. However, according to Stewart, “these fires were quickly put out, when the appellate courts or the great majority of other courts within the same jurisdiction were in line with what quickly became the overwhelming majority opinion that these were not direct bodily loss or damage.”

“As it stands now, the first and most dangerous wave of all of this appears to be passing,” Stewart said.

Stewart has represented insurance companies in multiple instances – as many as “dozens.” Earlier this week, it saw success in Pennsylvania, where the First Circuit Court ruled that excluding the virus was “unequivocal” in the V&S Elmwood Lanes v Everest National Insurance case.

US companies could have lost $606 billion in revenue per month under strict COVID restrictions, according to OECD estimates. This equates to 85% of total annual property and loss (P&C) premiums written in 2021 ($715.9 billion according to the Insurance Information Institute).

The companies most affected were those operating in the service industry and where physical presence is required, for example in construction.

At the time of writing, the University of Pennsylvania has tracked 751 COVID BI cases filed by companies in the food and service industry. Another 253 were served by ambulatory healthcare services, while 153 came from the accommodation industry.

According to Stewart, plaintiffs typically seek sums of hundreds of thousands of dollars or more.

“Most of the cases we’ve seen have been in a six-digit rise and that’s going up all the way [to] “Cases where insureds are seeking a quarter of a billion dollars,” Stewart said.

“[You have to] Accept the suggestion that these issues were far-reaching to begin with from the policyholders’ point of view,” Stewart explained.

“It should be an issue of very high value for them to decide it’s worth pursuing, so that a lot of the smaller cases are really taken out.”

Read more: Plaintiff’s Counsel’s View of COVID-19 Business Interruption Claims

When lockdown and lockdown measures were imposed for the virus, Stewart said, the insurance industry faced an “existential crisis” not seen since the asbestos crisis.

While the situation has largely played in the insurance companies’ favour thus far, reasons for concern may remain for some.

“The remaining issues are, to a large extent, cases involving a large number of insureds who have policies that have special conditions,” Stewart said.

“These other policies that potentially have different circumstances will have to be litigated separately and seriously on their own merits.”

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