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Archive for the ‘Coronavirus – Insurance Coverage and Extra-Contractual Liability’ Category

No Entry Without a Mask: Coverage for Discrimination?

Posted on: October 26th, 2020

By: Mallory Ball

More businesses are requiring masks or face coverings to protect their patrons and employees from COVID-19. Unfortunately, with the face-covering requirements, businesses are vulnerable to liability claims from patrons alleging they have been discriminated against by requiring them to wear a face covering. The allegations of discrimination may also include humiliation or mental injury as a result. In order to trigger coverage under the standard commercial general liability policy, the discrimination must fall within Coverage A (bodily injury) or Coverage B (personal and advertising injury). Even if the claims trigger coverage under Coverage A or B, there could be an exclusion under the policy that precludes coverage for the alleged discrimination.  

Depending on the jurisdiction and the policy, there might not be coverage for the discrimination claims. The general definition of bodily injury under the standard commercial general liability policy is “bodily injury, sickness or disease, including death resulting from any of these.” In some jurisdictions, mental injury is considered bodily injury. Thus, claims of discrimination with humiliation or mental injury in those jurisdictions might qualify as bodily injury. For the jurisdictions that do not consider mental injury as bodily injury, claims for mental injury resulting from discrimination probably would not trigger coverage under Coverage A of the standard commercial general liability policy. But, if the policy’s definition is broadened to include mental anguish, mental injury and/or humiliation, then there could potentially be coverage for the discrimination claims. Likewise, because discrimination is not one of the offenses in the general definition of personal and advertising injury, the discrimination claims would not fall under Coverage B. However, if the definition is broadened to include discrimination as one of the offenses, then there could potentially be coverage under the policy. Even if the claims do trigger coverage under Coverage A or B, some commercial general liability policies include a virus exclusion that might preclude coverage for discrimination claims arising from a face-covering requirement due to the coronavirus. Depending on the jurisdiction, other exclusions could apply as well such as for claims arising from the actual or alleged release or dispersal of pollutants.

With the increase in COVID-19 cases and winter around the corner, the face covering requirements are likely to remain in place for months. Although claims of alleged discrimination for not being allowed to enter a business without a face covering may increase as well, they are unlikely to be covered depending on the terms of the policy and the jurisdiction at issue.

If you have questions or would like more information, please contact Mallory Ball at [email protected].

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

FMG Attorneys Assist Prevailing Insurer in a COVID-19 Business Loss Claim

Posted on: October 8th, 2020

FMG attorneys Phil Savrin and Shawn Bingham secured a favorable outcome for Allied Insurance Company of America who was sued for rejecting a claim for lost business income after the insured shuttered its restaurant during the COVID-19 pandemic. The insured, a Cajun restaurant in the Atlanta area, decided to close its dining room after the governor issued an Executive Order that declared a state of emergency in March 2020. With losses continuing to mount, the restaurant sought coverage under its insurance policy that applied where business operations are suspended due to a “direct physical loss of or damage to” the property. When Allied determined that the coverage terms were not met, the restaurant filed a lawsuit seeking damages exceeding $900,000.

FMG’s lawyers moved to dismiss the lawsuit in which they asked the judge to confirm that Allied had applied the policy provisions correctly. The main argument was that the policy language requires a physical change in the property that prevented the business from operating for coverage to apply, such as a storm that destroys the roof. In this case, in contrast, the restaurant decided to close down its operations completely due to a concern for spreading the infection. Even if the decision to close was influenced by a government order, Allied argued, there was no physical change in the property preventing the continued operation of the business.

Allied filed its motion in July 2020 before any courts had issued decisions on coverage for business losses related to COVID-19. Since then, a number of courts have found for insurers based on either the absence of a “direct physical loss” to the premises as the cause of the closures or an exclusion for losses caused by a virus. No court has found coverage for business losses under the language in Allied’s policy although some judges have allowed the claims to proceed for factual development.

Allied was handed a victory, however, on October 6, 2020 when the chief judge of the Northern District of Georgia granted the motion and dismissed the restaurant’s lawsuit. He reasoned that despite the ongoing pandemic, there was no suggestion that there was a physical change in the restaurant’s property let alone one that “directly” caused the closure: “Every physical element of the dining rooms—the floors, the ceilings, the plumbing, the HVAC, the tables, the chairs—underwent no physical change.” As such, he found the insured’s claim that it physically lost the ability to operate “exceeds any reasonable bounds of possible construction, pushing the words individually and collectively beyond what any plain meaning can support.” He further ruled that the decision to close the restaurant was not a direct cause of the government order as the decision was made “by intervening persons as a result of intervening conditions.”

The case is captioned Henry’s Louisiana Grill, Inc. v. Allied Insurance Company of America, United States District Court for the Northern District of Georgia, Civil Action Number 1:20-cv-2939-TWT. If an appeal is taken it would be to the United States Court of Appeals for the Eleventh Circuit.

If you have questions or would like more information, please contact Phil Savrin at [email protected] or Shawn Bingham at [email protected].

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Statute of Limitations Tolled in California Amid Pandemic

Posted on: August 3rd, 2020

By: Matthew Jones

In response to the COVID-19 pandemic, California’s Governor Gavin Newsom issued a “state of emergency” for the entire State. In response, the California Judicial Council adopted several Emergency Rules to implement during the pandemic. In particular, Rule 9 states that all statute of limitations for civil causes of action are tolled from April 6, 2020 until 90 days after the state of emergency related to COVID-19 is lifted by the Governor. Therefore, if a party’s claim would have expired pursuant to the applicable statute of limitations during this timeframe, such claims are still very much alive. In regard to those claims, there is currently no deadline to file them since the “state of emergency” has yet to be lifted by the Governor. Once lifted, claimants will have six months to file their respective claims.

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Hurricanes, Pandemics, and Shortages, Oh My: Considerations for Hurricane Season in the Time of Coronavirus

Posted on: June 18th, 2020

By: Anastasia Osbrink

According to forecasters with the Climate Prediction Center at the National Oceanic and Atmospheric Administration (“NOAA”), a division of the National Weather Service, the 2020 hurricane season has a 60% chance of being an “above-normal season.” (See https://www.noaa.gov/media-release/busy-atlantic-hurricane-season-predicted-for-2020.)

This forecast is based on several factors. According to the NOAA, there are “warmer-than-average sea surface temperatures in the tropical Atlantic Ocean and Caribbean Sea,” including record high temperatures in the Gulf of Mexico. That “coupled with reduced vertical wind shear, weaker tropical Atlantic trade winds, and an enhanced west African monsoon all increase the likelihood for an above-normal Atlantic hurricane season.” Hurricanes are formed when “a weather disturbance, such as a thunderstorm, that pulls in warm surface air from all directions” combines with “water at the ocean’s surface that is at least 80° Fahrenheit.” (https://oceanexplorer.noaa.gov/facts/hurricanes.html.) Warm sea water gives hurricanes their strength. Therefore, the warmer the seawater, the more fuel they get, and the stronger these storms can become. Additionally, hurricanes lose strength if high-altitude winds shear apart the top of the storm. Hence, reduced vertical wind shear and weaker tropical Atlantic trade winds will also enable stronger storms to form. (https://oceanexplorer.noaa.gov/facts/hurricanes.html.) Regarding the fourth of these conditions, a stronger west African monsoon season “allows wind patterns coming off Africa to more easily spin up storms.” (https://www.noaa.gov/stories/whirlwind-of-atlantic-hurricane-season-what-gives.) Additionally, as the NOAA explains, “El Nino Southern Oscillation (ENSO) conditions are expected to either remain neutral or to trend toward La Nina, meaning there will not be an El Nino present to suppress hurricane activity.” (https://www.noaa.gov/media-release/busy-atlantic-hurricane-season-predicted-for-2020.) The NOAA notes that when “similar conditions” have been present in the past, they have produced more active seasons than when these conditions are not present. In fact, this is the first time since records of hurricanes have been kept where there were three named storms before the official start of hurricane season on June 1st.

There is, though, another factor that will have an impact during this season’s hurricanes and storms – Coronavirus and COVID-19 – for several reasons.

First, during these initial months of response to Coronavirus and COVID-19, staples like toilet paper, water, disinfectants, and first-aid items often have been out of stock at stores and online. With storms heading their way, certain population centers will have to respond to the inevitable rush for food, bottled water, and other crucial supplies.

Second, many people living along the Southeastern Seaboard and the Gulf Coast rely on various businesses that provide hurricane preparation and storage services, such as window boarding, sandbagging, and securing of personal property. With many businesses struggling to remain open or maintain their workforce due to the pandemic, such services may be more difficult to find.

Third, if people have to head to evacuation centers, which are enclosed spaces crowded with people, the virus and COVID-19 may be more likely to spread.

Finally, as cities and states respond, they will need to put more time, effort, and resources into planning and setting up these centers to ensure social distancing can be practiced. One solution is more centers with more volunteers. Additional personal protective equipment (“PPE”) will be needed such as extra masks, gloves, hand sanitizer, and washing stations.

Some of the resources available to respond to these risks are provided in the following links:

https://www.ready.gov/hurricanes

https://www.cdc.gov/coronavirus/2019-ncov/index.html

https://www.fema.gov/news-release/2020/06/01/prepare-2020-hurricane-season-now

https://www.weather.gov/wrn/hurricane-preparedness

If you have any questions or would like more information, please contact Anastasia Osbrink at [email protected].

Additional Information:

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you. We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

A Tale of Two Cities: COVID-19 Business Interruption Coverage in New York and Paris

Posted on: June 5th, 2020

By: Isis Miranda

Two sides of the pond. Two different outcomes.

In New York, Social Life Magazine, Inc. sought immediate relief from the court in a case against its insurer, Sentinel Insurance Company, Limited, for business interruption coverage losses it sustained due to the closure of its business as a result of Governor Andrew Cuomo’s shutdown order in the wake of the coronavirus pandemic. Social Life explained in its application to the court in the Southern District of New York that it had “no money to publish any magazines,” as it was left with only $2,106.94 in its two bank accounts and was therefore “already out of business.” Social Life stated that it sustained over $200,000 in lost income in March and April 2020 and explained that it also had contractual obligations to its advertisers, which had already paid Social Life approximately $240,000 and were “expecting their advertisements this summer.” Social Life stated that it had received only $1,000 under the CARES Act and that it had not yet received any response from the Small Business Administration regarding its loan application. For these reasons, Social Life sought a preliminary injunction ordering Sentinel to pay for its business interruption losses incurred thus far while it continued to prosecute its case against Sentinel.

In Paris, Stephane Manigold, the owner of four Paris restaurants, also sought immediate relief from the Paris Commercial Court in a case against his insurer, AXA, S.A., for business interruption losses stemming from the coronavirus as a result of the French Government’s order limiting restaurants to takeout only. Manigold stated that he had a cash deficit of €201,413, which he expected to increase by €45,903 by the end of May. Like Social Life, Manigold sought immediate payment of his restaurants’ business interruption losses incurred to date.

New York

“What is the damage? There is no damage to your property,” the New York judge said to Social Life’s counsel during the telephonic court hearing on its application on May 14. Focusing on whether Social Life could show it sustained a “direct physical loss or damage” under its policy, the judge cut short Social Life’s argument that the absence of a virus exclusion in the policy indicated there was coverage. “Well, the virus exists everywhere,” Social Life’s counsel responded, to which the judge retorted, “It damages lungs. It doesn’t damage printing presses.”

When Social Life’s counsel attempted to argue that the “loss of use” of the property constituted direct physical loss or damage, the judge did not bite. She explained: “With loss of use, I mean, loss of use from things like mold is different from you not being able to, quote, use your premises because there is a virus that is running amuck in the community.” Social Life’s counsel attempted to equate mold spores and bacteria with a virus, stating: “Mold spores, bacteria, virus, all those are physical items which damage whatever they are on, whatever they land on. And in this case, the virus, when it lands on something and you touch it, you could die from it.” The judge, again, explained: “That damages you. It doesn’t damage the property.”

Moving on to the issue of causation, the judge explained: “That is what has caused the damage is that the governor has said you need to stay home. It is not that there is any particular damage to your specific property . . . You may not even have the virus in your property.” This led to a short colloquy in which the judge asked, “What evidence do you have that your premises are infected with the COVID bug?” Social Life’s counsel responded: “Well, the plaintiff is here. He got COVID. So that’s evidence there.” The judge replied, “Well, it’s not evidence that he got it in his office.”

Sentinel’s counsel argued that the “loss of use” cases Social Life relied upon were not New York cases and, therefore, not applicable. Sentinel’s counsel went on to explain that “even in those other cases,” the “property has to be entirely unusable or uninhabitable” for “loss of use” to constitute physical loss or damage. Because, according to Sentinel’s counsel, the governor’s order explicitly allowed employees to access their property to get mail or do routine business functions, Social Life could not satisfy the “direct physical loss or damage” requirement, even if the judge decided to apply out-of-state law regarding “loss of use.”

In response, Social Life’s counsel argued that the governor’s shutdown order mandated “100 percent” compliance, to which the judge responded by asking a rhetorical question, “You are in your office?” In part because, in the judge’s opinion, “There is nothing about the governor’s order that prohibits a small businessperson or a big business person from going into their office to pick up mail, to water the plants, to do anything like that, including employees that are working,” she found there was no coverage under the policy.

The judge concluded the debate by telling Social Life’s counsel:

I feel bad for your client. I feel bad for every small business that is having difficulties during this period of time. But New York law is clear that this kind of business interruption needs some damage to the property to prohibit you from going. You get an A for effort, you get a gold star for creativity, but this is just not what’s covered under these insurance policies.

Although Social Life filed a notice of appeal shortly after the hearing, it subsequently dismissed its complaint and the appeal. It’s unclear whether Social Life simply changed its mind or if the dismissal was the result of a settlement with Sentinel. The End.

Paris

Anais Sauvagnac, Stephane Manigold’s attorney, told reporters on May 22 that the Paris Commercial Court had issued an interim order requiring AXA to reimburse Manigold for his legal fees and pay for two months’ worth of coronavirus-related revenue losses. Manigold’s attorney stated: “This means that all companies with the same clause can appeal to their insurers.”

As widely reported, Manigold was in his office when he learned of the court’s decision. He reportedly high-fived a colleague and his supporters applauded. Manigold told Reuters, “This is a collective victory,” and later cried as he spoke to reporters in front of one of his empty restaurants.

In making its decision, the court considered Manigold’s “seriously overburdened financial situation” in finding that his request for immediate relief was sufficiently “urgent” to warrant an immediate ruling by the court. The court also determined that AXA had failed to present a serious challenge to Manigold’s claim for coverage, noting that the policy did not expressly exclude pandemic risk.

Like Sentinel, AXA argued that coverage was not triggered under the policy since the French Government’s order had not mandated the closure of restaurants but rather allowed them to remain open for takeout service. The court disagreed. It found that Manigold had demonstrated coverage for business interruption losses sustained by his restaurants because they were prohibited from allowing customers to dine in, which was their traditional form of business.

AXA immediately vowed to appeal the ruling. Several days later, however, AXA announced it was seeking an amicable resolution and planned to meet the bulk of claims from restaurant owners whose contracts contained some ambiguity. According to AXA’s CEO, Thomas Buberl, “These contracts represent less than 10% out of total contracts with restaurants owners and I am confident that we will find a solution. . . We want to compensate a substantial part of these contracts. We want to do it quickly.” In pledging an additional €500 million in aid for small companies, Burberl explained, “The idea is clearly to reinforce those companies that are weakened by this crisis.” AXA has not said whether it has also changed its mind about appealing the ruling. Fin (with a possible sequel to come).

The Missing Characters

The two most important characters in this story – Social Life’s insurance policy and Manigold’s insurance policy – are missing. Unsurprisingly, Manigold reported that his team had received calls from Britain, South Africa, Spain, and the United States asking about the contents of his insurance policy, causing him to conclude: “This decision in Paris has a global resonance.”

Without analyzing the policies’ express terms, we are left to speculate whether the different outcomes – just one week apart – result primarily from differing policy language or differing approaches to judicial application. This may not be a tale of two cities but a tale of two policies.

One thing we know for certain during these uncertain times is that the words of Charles Dickens ring truer than ever:

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way. – A Tale of Two Cities

Another certainty is that this is the beginning of a new era. We will continue to report on the myriad business interruption coverage cases citing COVID-19-related losses as they progress through the courts across the globe.

If you have questions or would like more information, please contact Isis Miranda at [email protected].

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis.  Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**