Coronavirus and Business Interruption Insurance CoverageAdded by Dane A. Bolinger in Articles & Publications, News on April 2, 2020
The chaos of the coronavirus is beginning to hit the insurance industry. Concerned that the coronavirus may possibly result in a crippling amount of new insurance claims (similar to the influx of claims post-9/11), insurance companies are lobbying Congress for preemptive relief. On the other hand, businesses – especially small businesses facing the devastating consequences of government-mandated shutdowns – are looking to their “Business Interruption” or similar insurance coverages to help cover the loss.
Thus far, most insurers appear determined to fight coverage of coronavirus-based business interruption claims on the basis that such coverage is triggered by “physical damage” to property. In other words, the insurance companies argue that coverage does not apply because the coronavirus does not cause “physical damage” to property. However, in a series of new lawsuits, several insured businesses filed declaratory judgment actions seeking coverage for coronavirus-based shutdowns, despite the “physical damage” requirement.
In French Laundry Partners, LP v. Hartford Fire Ins. Co., restauranteur Thomas Keller alleges that his restaurant businesses should be covered for business losses under an “all risks” policy issued by Hartford, which provides “Civil Authority” coverage. The complaint filed on behalf of Mr. Keller’s businesses appears to argue that the “physical damage” requirement is satisfied because the coronavirus “physically infects and stays on surfaces of objects or materials, [and] ‘fomites,’ for up to twenty-eight days.” A similar lawsuit was filed by a restaurant, Oceana Grill, in New Orleans.
Similarly, two Native American tribes, the Chickasaw and Choctaw Nations, filed lawsuits against their insurance companies seeking coverage for financial losses allegedly incurred due to mandated shutdowns of their casino businesses. The Chickasaw Nation’s complaint alleges that, “[a]s a result of the [COVID-19] pandemic and infection, the Nation’s Property sustained direct physical loss or damage and will continue to sustain direct physical loss or damage[.]”
In addition to this flurry of new lawsuits, several state legislatures are considering legislation that would force insurance companies to help shoulder the financial consequences of the coronavirus. Lawmakers in New Jersey, Ohio, and Massachusetts proposed such legislation, although counter-lobbying efforts from the insurance industry are sure to follow. Moreover, some commentators suggest that such legislation, even if passed, could be challenged as unconstitutional.
The above information is likely just the “tip of the iceberg” in terms of what developments both insureds and insurers are likely to face in the wake of the COVID-19 pandemic. If you have questions regarding insurance coverage issues or claims, please do not hesitate to contact Dane Bolinger, Lars Lundberg, or anyone in Hawley Troxell’s Insurance Practice Group with questions.
 Zachary Warmbrodt, Insurers Scramble to Avoid 9/11-Style Coronavirus Backlash, Politico (March 26, 2020, 4:30 AM EDT), https://www.politico.com/news/2020/03/26/insurers-avoid-9-11-style-coronavirus-backlash-149462.
 Complaint for Declaratory Relief at 3, French Laundry Partners, LP dba The French Laundry, et. al. v. Hartford Fire Ins. Co., et. al., Superior Court for the State of California, County of Napa (March 25, 2020).
 Joanna Fantozzi, Here’s What Your Restaurant Business Insurance May (Or May Not) Cover During the Coronavirus Pandemic, Nation’s Restaurant News (March 25, 2020), https://www.nrn.com/finance/here-s-what-your-restaurant-business-insurance-may-or-may-not-cover-during-coronavirus.
 Randy Ellis, Coronavirus in Oklahoma: Tribes Sue Insurance Companies Over Business Interruption Coverage, The Oklahoman (March 25, 2020, 1:05 AM), https://oklahoman.com/article/5658477/coronavirus-in-oklahoma-tribe-sues-insurance-companies-over-business-interruption-coverage.
 Jeff Sistrunk, Ohio, Mass. Bills Aim to Expand Companies’ Virus Coverage, Law360 (March 25, 2020, 9:16 PM), https://www.law360.com/articles/1257074/ohio-mass-bills-aim-to-expand-companies-virus-coverage.
 Jeff Sistrunk, Coronavirus Business Loss Bills Face Constitutional Hurdles, Law360 (March 26, 2020, 6:59 PM), https://www.law360.com/articles/1257211/coronavirus-business-loss-bills-face-constitutional-hurdles.
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