Trending Up, Courts Find Potential Cover for COVID-Related Business Interruption Losses – Laws and Insurance Products

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Since June 2022, policyholders have grown cautiously optimistic as two state appeals courts ruled in favor of policyholders seeking business interruption coverage resulting from COVID-19. As has been well documented since the start of the pandemic, courts have largely refused to find coverage for such loss, often based on the assumption that COVID-related closures do not meet the requirement of ” physical loss or damage” found in most policies.

In mid-June, however, a Louisiana appellate court found that the presence of coronavirus at an insured’s premises caused covered “loss or physical damage” to property. And recently, a New York appeals court unanimously upheld a decision allowing an insured to pursue a business interruption claim for income lost during a government-ordered shutdown. The contested policy, held by the New York Botanical Garden, covers business interruption but conditions coverage on physical damage to property. Therefore, the First Department of the New York Appellate Division found that the insurance company could not properly rely on decisions that made coverage conditional on a complete denial of access to the property due to damages. physical. Instead, the court found that coverage was potentially available when an insured business experiences a downturn in operations due to a pollution incident.

The court also upheld the viability of the Botanical Garden’s bad faith claim, finding that the Botanical Garden had adequately alleged that the insurance company “failed to conduct a full or fair investigation into its claim, had no valid basis to deny the claim and simply denied in accordance with a business policy of denying COVID-related business interruption requests.”

The ruling is a reminder that not all business interruption policies are alike, and many contain more favorable triggers or have ambiguities that can be exploited to gain access to coverage. Whether an organization’s business interruption losses are related to the coronavirus or other causes, it’s important to carefully review insurance policies and consult with a coverage advisor to ensure you explore all potential recovery theories.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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