COVID-19 claims are a hot topic these days. It’s difficult to determine if exposure to COVID-19 will result in direct physical loss or financial damage. COVID-19 policies lack exclusionary language, but some business interruption insurance policies include an exclusion for such incidents. If you’re in business and your business is affected by this epidemic, you may want to consult an insurance expert about COVID-19 claims.
COVID-19 claims are hotly contested
As the business interruption coverage under COVID-19 grows more complex, insurance companies are attempting to make it harder for policyholders to file a claim. Many insurers have responded by arguing that COVID-19 is not a physical loss, and therefore, does not trigger a business interruption claim. A recent case in California highlights how these disputes can be resolved. In SWB Yankees, LLC v. CNA Fin. Corp., a Pennsylvania state court judge rejected insurance company arguments in favor of their client.
The first COVID-19 business interruption insurance lawsuit was filed in March 2020. Since then, COVID-19 cases have been flooded onto court dockets across the country. They have moved more quickly through federal courts, and circuit courts are starting to rule on them. Although these cases have been hotly contested, they may still stand. However, the Supreme Court is considering granting certiorari in the Mama Jo case, which could affect the way COVID-19 claims are resolved.
COVID-19 exposure causes direct physical loss
When assessing COVID-19 coverage, policyholders must show that the virus altered the insured property. The insurance industry will soon need to address the issue. While most policies cover direct physical damage, COVID-19 may be excluded if the contamination does not cause property damage. In addition, the insurance company may be required to provide additional protection if the virus causes a major pandemic.
The courts have recognized this possibility. In United Air Lines, Inc. v. Insurance Co. of State of PA, the insurance company failed to defend a business owner’s claims for physical damage due to COVID-19 exposure. The plaintiffs’ attorneys were able to claim that the contamination caused a physical loss, even though there was no evidence of contagion.
COVID-19 policies lack exclusionary language
Virus-related losses are excluded from coverage under COVID-19 policies. Although this form of coverage limits liability for losses caused by a virus, it doesn’t cover losses resulting from fungus, dry rot, or bacteria. Similarly, policies that do not have an “effective proximate cause” clause may not cover business interruption lawsuits caused by viruses.
Some COVID-19 policies do not provide any business interruption coverage. These policies generally exclude damage caused by viruses, bacteria, or illness. However, some policies incorporate virus exclusion. A virus exclusion adds another basis for denying coverage, thereby enhancing an insurer’s chances of winning a challenge. In California, however, COVID-19 policies lack an exclusionary language for business interruption lawsuits.
Paul, Weiss has secured the dismissal of 27 actions on behalf of CNA
For CNA, a successful defense strategy requires a coordinated and cohesive approach. The Paul, Weiss team consists of litigation partners, appellate lawyers, and counsel. The firm’s team is led by Kannon Shanmugam, who has experience in appellate work. He oversees the firm’s appeals in 11 federal courts and the CNA appellate response.
The case involved small and large businesses claiming their property damage insurance policies covered losses during the pandemic. The case was one of the hundreds that had been filed in courts across the country. With hundreds of similar lawsuits consolidated in the same court, Judge Rothstein’s ruling was expected. Paul, Weiss’ attorneys helped coordinate a motion to dismiss brief on behalf of ten insurer groups.
Cost of litigation
The cost of litigation in COVID-19 business interruption suits is expected to be substantial, as the cases will almost certainly take many years to resolve. This is likely due to the complexity of the law, the many possible defense strategies, and the need to establish the existence of a presumption of coverage. Many state legislatures are considering these issues, but they are still in the early stages. One state has already ruled that it will not settle any of the COVID-19 business interruption lawsuits.
The proposed change could also have significant implications. For instance, it could force insurers to pay for unintentional business interruption claims. The scale of these losses might exceed the insurers’ surplus capital, making them unable to respond to future events. Such a move could make insurance companies hesitant to cover such claims in the first place. However, the proposed changes to COVID-19 could result in a more favorable outcome for businesses and homeowners alike.
Impact on insurance companies
COVID-19 is a virus that has disrupted businesses in a wide range of industries, including healthcare. Insurers have found it difficult to ensure such risks, which can have high occurrence rates and low losses. Because of these factors, insurers often charge premiums close to their expected loss levels, even though actual claims are low. This may not be in the best interests of insurers, who are already under pressure from regulators to do a good job.
In response to COVID-19, insurance companies have been addressing the issue by offering additional coverage and voluntary payments to policyholders in some industries. For example, Swiss insurance companies have agreed to compensate restaurant sector policyholders for losses due to business interruption. A German insurer, meanwhile, has agreed to compensate business interruption losses equal to ten to fifteen percent of the normal daily costs incurred by policyholders in the hospitality industry. Another German insurer is reportedly considering similar compensation for all policyholders in Germany.