Business Interruption Insurance COVID-19 claims -- Society Insurance, Twin City d/b/a Hartford, others

On April 20, 2020, some 15 Chicago area restaurants, taverns, inns and bars represented by Edelman, Combs, Latturner & Goodwin, LLC and attorneys in the Chicago and Indianapolis offices of Taft, Stettinius & Hollister, LLP filed a class action against Society Insurance alleging that Society is improperly denying COVID-19-related business interruption coverage claims arising under Illinois law. Parson’s Chicken & Fish, LLC v. Society Insurance Co., 2020 CH 3916 (Cook County Circuit Court). Society has taken the position that all losses related to a government closure order are uncovered, even though the insureds specifically purchased business interruption coverage that includes protection against government closures and their policies did not contain a common exclusion for losses caused by viruses and diseases. The State of Illinois issued orders on March 15, 2020, closing all restaurants, bars, and movie theaters, and on March 20, 2020, closing all “non-essential businesses.”

A similar lawsuit was filed on behalf of a restaurant insured by Twin City d/b/a Hartford.

Illinois cases hold that the presence of a dangerous substance in a property posing risk to health or safety constitutes physical loss or damage, which is what triggers business interruption insurance. In addition, the Society policies include “civil authority” coverage which provides coverage for losses because governmental authorities prohibit access to an insured’s location because of "damage" to property other than the insured’s.

A number of the orders issued by government authorities in response to the COVID-19 pandemic expressly state that COVID-19 causes "physical loss" or "damage" to property. For instance, the March 16, 2020, shelter-in-place order issued by the Mayor of New York City states that COVID-19 "physically is causing property loss and damage." Emergency Executive Order No. 100. The March 31, 2020 shelter-in-place extension order of the Sonoma County Health Officer states that it was issued "because the virus physically is causing property loss or damage due to its proclivity to stay airborne and to attach to surfaces for prolonged periods of time." Order No. C19-05. The state of Colorado issued a Public Health Order stating that “COVID-19… physically contributes to property loss, contamination, and damage…” Broward County, Florida issued an Emergency Order stating that COVID-19 “is physically causing property damage.” The State of Washington issued a stay at home Proclamation stating the “COVID-19 pandemic and its progression… remains a public disaster affecting life, health, [and] property…” The State of Indiana issued an Executive Order stating that COVID-19 has the “propensity to physically impact surfaces and personal property.” The City of New Orleans issued an order stating “there is reason to believe that COVID-19 may spread amongst the population by various means of exposure, including the propensity to attach to surfaces for prolonged period of time, thereby spreading from surface to person and causing property loss and damage in certain circumstances.” The State of New Mexico issued a Public Health Order acknowledging the “threat” COVID-19 “poses” to “property.” North Carolina issued an Executive Order to “assure adequate protection of… property.” The City of Los Angeles issued an Order “because, among other reasons, the COVID-19 virus can spread easily from person to person and it is physically causing property loss or damage due to its tendency to attach to surfaces for prolonged periods of time.”

We are evaluating other cases of this nature.

Contact us if you have business interruption insurance coverage, from any company, and your claim has been denied. There is no charge for consultation.

Cases of this nature require careful analysis of the policy provisions and applicable law, which may vary from state to state. An attorney familiar with coverage issues should examine the exact language of a business’ insurance policies.

Meanwhile, business owners should preserve their rights by informing their insurance carrier in writing that they are seeking all coverage under their policies for their business losses, and not be dissuaded from doing so by statements by insurance carriers or brokers that no coverage exists. Insurance policies generally require the policyholder to provide “prompt” notice to the insurer and to follow up with a signed and sworn proof of loss, sometimes within a set number of days after the initiation of losses. Documenting losses and expenses and describing claims in a legally accurate manner is essential.