Governors are closing their states. Mayors are closing their cities. Businesses are sending their employees home to work. Restaurants are only allowing carryout, delivery, or shutting down completely. Employees are being laid off or losing their jobs completely. The Coronavirus situation is certainly causing economic havoc in addition to the illness itself and certainly hospitalizations and deaths are resulting.
Unquestionably, the insurance industry is going to be significantly affected. Although I have done no type of economic analysis or research, I do not think one would quarrel with me that economic losses as a result of the shutdowns occurring due to the Coronavirus pandemic easily could reach the billions of dollars. We all know what will result from these financial losses that being claims will be brought against the insurance industry. No one doubts that there will be an influx of both first party and third party claims in the months to come. The questions that will fall to the plates of those of us in the claims industry will be both coverage and liability issues.
We are already seeing informal questions as to whether these claims “will be covered” when they arise. That is a question that is not easily answerable. (“I know, I know, no lawyer wants to answer a simple question unless he is on the clock.”) A simplistic answer might be to just look quickly to page eighteen of the standard Businessowner’s Policy and find the listed exclusions section and see if there is any mention of an exclusion dealing with a virus, fungus, bacteria, or a communicable disease and then respond “Oh, good, it is not covered.” I submit the analysis cannot end there and would be a mistake to not look further.
There is no question that our friends among the Plaintiff’s bar will be pushing hard, with the amount of money at issue, to make others pay for any loss that individuals or businesses incur as a result of the Coronavirus pandemic. Such is the nature of our present jurisprudence. Why take no for an answer from the coverage adjuster when a $150 filing fee and a petition get to put the answer to that question before a state trial court?
BUSINESS INTERRUPTION AND FIRST PARTY CLAIMS
Probably the most anticipated area in which I expect to see a flood of claims will be over Business Interruption coverage. Such Business Interruption coverage is intended to protect the insured against any type of income loss due to a disruption of its normal operations or business dealings. Generally, some type of “direct physical loss or damage” to some type of insured property is necessary in order to trigger a covered loss. Perhaps most might initially respond, on the carrier side, that the Business Interruption coverage would then surely not apply because there has been no “physical loss to the property.”
Certainly, arguments will be brought forth to the contrary as that is the nature of the business in which we have elected to establish our professions. Businesses may assert that their restaurant tables, tools, or work surfaces were contaminated by the Coronavirus and such was then the “physical loss” which triggered the closing of their business and the disruption.
I have already heard of suit being filed by a restaurant seeking a ruling on the scope of its business interruption coverage due to the Coronavirus situation. The governor has restricted gatherings and the mayor has restricted restaurants’ operations. The restaurant asserts that its business closure is then due to a directive of the “civil authorities” which, the restaurant argues, triggers coverage under its policy.
Undoubtedly, similar claims and suits will be filed across the country. The question for the courts will be whether the Coronavirus pandemic has rendered property to be “lost” or unfit for use and whether or not there has thus been any “physical loss” triggering coverage.
Remember, the burden will be on the insured to prove coverage but that any burden of proving the effect of any exclusion in the policy would then rest on the carrier. Accordingly, even if an insured may establish a convincing argument that coverage exists for a “physical loss” sustained by the business then exclusions must be examined within the policy. Exclusions can vary from policy to policy. (Hence, I have to at least read your policy before I can tell you if there is coverage). Some wish to argue that a typical “fungi and bacterial exclusion” should apply to preclude coverage for the Coronavirus, however, the Coronavirus is a “virus” and not a “fungi” or a “bacteria.” Thus, seemingly, the exclusion for fungi and bacteria would not apply.
Others may try to argue that the “pollution exclusion” would apply. I think it would be a stretch to convince any court that the Coronavirus is a “pollutant.”
Other policy language which certainly would come into play would be the effect of “communicable or infectious diseases.” Some policies have this provision as an exclusion and it would seem that great mileage would be available to the carrier to rely on any such exclusion dealing with Coronavirus if within your policy. I have heard, however, that other policies contain specific endorsements which specifically include coverage for communicable and infectious diseases. Accordingly, as in all cases, one must review the policy language to see what is and is not covered.
Similarly, and as mentioned in the restaurant case above, whether or not coverage is available for Business Interruption coverage due to declarations by “civil authority” will certainly come into play. The governors and mayors are shutting down states, cities, restaurants, businesses, and telling people to stay home. Under some policies this “civil authority” disruption may be specifically covered and through other policies may have exclusions.
LIABILITY THIRD PARTY CLAIMS
When dealing with first party claims it would appear that the issues for Business Interruption coverage would depend on the policy language portions which I have referred to or any other applicable language contained within your policies. Perhaps the more interesting or volatile litigation may fall within third party liability claims that will also undoubtedly follow. It is not hard to imagine lawsuits being filed by infected guests against individuals and businesses for failure to exercise reasonable care in cleaning their premises; guarding guests from being infected; failing to close their business to prevent the spread of Coronavirus; failing to insure their employees were clean and not infected themselves; or taking any other measure which the infected guest feels would have prevented their illness. It is not hard to see how restaurants, schools, day care centers, stores, gyms, hotels, or any other place where it is common for gatherings or meetings to be hosted could be exposed to this type of litigation. I have already heard of a lawsuit against a cruise line brought by infected passengers where the lawsuit is supposedly based upon the knowledge of the cruise line that infected passengers were allowed to board the ship.
With these third party claims causation should certainly be a problem for the Claimants. Plaintiffs would certainly have to prove that they contracted the Coronavirus because of the alleged negligence of the defendant. Clearly, with the exponential growth of the Coronavirus, it is not hard to argue that an infected plaintiff could have received his or her exposure from numerous places and for a plaintiff to meet the burden of proof might be difficult. Accordingly, I would think it reasonable that any such third party claims asserting this theory would be reserved to the larger damage cases probably involving resultant hospitalizations or deaths. It is hard to imagine that someone who is exposed to the Coronavirus and only suffers milder symptoms such as fever and a dry cough would bring any type of cause of action from a practical sense—assuming common sense prevails after this pandemic subsides.
Other coverage issues which would come to the forefront in dealing with third party claims would also be whether the actions or inactions of the defendant in allegedly exposing the plaintiff to the Coronavirus is due to “an accident.” Certainly that area would be ripe for litigation as the definition of “accident” always seems to be.
LEGISLATIVE ACTIVITY
Lastly, even putting aside all of these areas of potential litigation, it will be interesting to see if the legislative branches get involved. I have seen a letter authored by eighteen members of Congress dated March 18, 2020 directed to four leaders of the insurance industry “urging” their member companies to make financial losses due to the Coronavirus pandemic part of the Business Interruption coverage and protecting the policyholders. The members of Congress in that letter refer to the “direct physical loss or damage to” language and the “civil authority” policy language. I would think that those members of Congress who signed off on the letter probably were being educated by plaintiff’s lawyers experienced in coverage work due to that buzz language. The letter continued that the insurance industry must “work together” with others to keep the economy moving. Is this a hint that the various legislatures may enact legislation in this area?
These times are uncertain. Rulings in this area will be all over the map. Perhaps the only certainty is that there will be much litigation to follow and the focus will be on the language of your particular policy language.