Court decisions related to COVID-19 business income claims continue to become public all over America and we are following these events closely for our business insurance clients including two such Florida cases that concluded last week. Courts continue to generally rule in favor of insurers and focus on the common property insurance exclusion related to losses caused by a “virus or bacteria” as well as the common business income question related to whether one has suffered direct physical damage from the pandemic.    

In Mauricio Martinez DMD v. Allied Insurance Company of America (aka Nationwide) the U.S. District Court ruled that “the insurance policy expressly excludes coverage from damages caused by a virus”.  Dr. Martinez argued that he had incurred costs required to clean his office and that he has lost income due to civil authority (state and local government’s) mandates that required him to close his dental practice. The Court ruled in favor of his insurance company on the basis that the loss was not due to a “Covered Cause of Loss” as a result of the policy having a virus exclusion.

The ruling in the Martinez case follows other recent Court rulings were similar litigation has been dismissed in favor of insurers but in most other cases the Court’s reasoning were based on a lack of “direct physical” damage and those Courts never appear to have even gotten to the point of considering whether policy exclusions might apply. As I have noted in earlier posts, most property policies commonly exclude losses from a “virus” and have other standard exclusions such as one related to “war” and another related to “nuclear” disasters. In the case of the virus exclusion it has been common for nearly two decades, dating to the SARS outbreak in the early 1990’s. Interestingly, the Martinez case appears to be one of the first decisions to focus on the fact that a loss caused by a “virus” under his policy is not a “covered peril” and that it is, therefore, excluded.

Earlier this month yet another business income lawsuit, in that case a restaurant chain in California, was also dismissed, following the fate of most such COVID-19 litigation to-date. In 10E LLC v. Travelers Indemnity, the U. S. District Court in  California ruled that the law requires “distinct, demonstrable, physical alteration” to a property to qualify as “direct physical loss of or damage.” In writing its decision the Court stated; “An insured cannot recover by attempting to artfully plead impairment to economically valuable use of property as physical loss or damage to property.” The Judge (Wilson) in that case  also stated that the restaurant “plausibly alleges that in-person dining restrictions interfered with the use or value of its property – not that the restrictions caused direct physical loss or damage.” 10E’s policy is reported to contain a virus exclusion that is common to property policies but the Court did not discuss that exclusion as it determined that a lack of physical damage barred recovery under any of policy provisions.

Similarly, In Malaube LLC v. Greenwich Insurance Company, the U. S. District Court of Florida ruled that a Miami restaurant’s claim for “pure economic losses stemming with no connection to any physical loss or damage” should be dismissed.

We sincerely realize the dire hardships, in many cases catastrophic financial damage, that this cruel pandemic has caused and for that reason we continue to report COVID-19 claims and pursue adjuster’s answers as well as pertinent Court cases. In the event you would like to file a claim or discuss how your insurance company and policy might react to a claim please know that we are most happy to assist. Please contact our professional agents and underwriters at any time and, as always, thank you for allowing us to provide your protection.

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