CLOSE X
RSS Feed LinkedIn Instagram Twitter Facebook
Search:
FMG Law Blog Line

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

Northern District of Georgia Finds Waiver of Coverage Defenses Not Specified in Denial Letter

Posted on: January 13th, 2021

By: Kristin Ingulsrud

In Hoover v. Maxum Indemnity Co., the Supreme Court of Georgia held that an insurer had waived a defense by failing to raise it in its initial letter denying the claim. The standard applied by the court in Hoover is that an insurer responding to a Georgia policyholder’s claim must (1) afford coverage; (2) defend under a reservation of rights; or (3) deny coverage. Hoover v. Maxum Indemnity Co., 730 S.E.2d 413, 416 (Ga. 2012). And, if the insurer denies coverage, it must state in the letter each specific ground for denial. In Hoover, the court held that because the insurer’s denial letter did not list the insured’s failure to comply with the policy condition governing notice, the insurer was barred from later relying on such failure as a defense to coverage. 730 S.E.2d at 418.

The Northern District of Georgia recently relied on Hoover in a dispute over defense cost coverage for alleged False Claims Act violations.  SavaSeniorcare LLC v. Starr Indemnity & Liability Co., No. 1:18-CV-01991-SDG, 2020 WL 5820643 (N.D. Ga. Sept. 29, 2020). In their initial denial letters, both the primary and the excess insurers relied on a single policy exclusion to deny above a $1 million sublimit in the primary policy. After litigation commenced, the insurers asserted additional grounds to deny coverage, including late notice of claim. 

Relying on Hoover, the insured moved for partial summary judgment on the insurers’ defenses not asserted in their respective denial letters. The court rejected the insurers’ argument that Hoover should be limited to the duty to defend, and not to indemnity policies that reimburse defense costs. The court also rejected the insurers’ argument that they did not deny coverage but rather only limited coverage to the $1 million sublimit, finding that a limited recognition of coverage constitutes a denial of any other coverage.

The Hoover and SavaSeniorcare rulings provide insurers with an incentive to complete their investigations and to specify all coverage defenses in their denial letters.

If you have questions about this topic please contact Kristin Ingulsrud at [email protected], or any member of FMG’s Insurance Coverage and Extra-Contractual Liability Practice Group. The firm provides these services nationally with more than 50 insurance coverage attorneys across the country. If your inquiry is COVID-19 related, please contact our Coronavirus Task Force Team for more information.

California Assembly Bill 1552 – Near Miss or Cautionary Tale for Insurers?

Posted on: November 11th, 2020

By: Ryan Greenspan

As fear of the novel coronavirus and COVID-19 continues to grip the world, an array of government rules, restrictions, and guidelines have been imposed. Some businesses have been operating at a limited capacity and some have closed outright. In March of this year, California’s governor issued one of the strictest orders in the country, defining what is an “essential” and a “non-essential” business and then ordering all so-called “non-essential” businesses to shut down indefinitely. The governor has since permitted certain businesses to re-open to varying degrees.

Many businesses are now seeking to recoup their losses by making claims under insurance policies that provide for business interruption coverage.

Courts around the country have already weighed in on the applicability of business interruption insurance, but this past summer, California Assembly members James C. Ramos and Monique Limon introduced Assembly Bill 1552 (“AB 1552”). Typically, business interruption insurance is available when the insured can prove direct, physical loss or damage to covered property. AB 1552 was different from other, similar bills introduced in such states as Massachusetts and New York because it would have created a rebuttable presumption that the novel coronavirus was present at a business’s property and resulted indirect, physical damage to or loss of property. Bills introduced in other states would have simply mandated coverage, which would make those bills subject to constitutional challenges from insurers. AB 1552’s rebuttable presumption was an attempt to withstand a constitutional challenge.

On June 26, 2020, AB 1552 passed in the California State Assembly by a 77-0 margin. However, it was unable to garner further support and was pulled from consideration before receiving a vote in the State Senate. With the California Legislature currently in recess until January 2021, there is no chance that such a bill, in any form, will be passed in 2020. 

While insurers operating in California may have dodged a proverbial landmine, the governor’s forced closures continue, and many believe that when the California state legislature reconvenes in 2021, a form of AB 1552 revised to attract Senate support may be introduced. Its significant support in the State Assembly is likely to keep the possibility alive for 2021.

If you have any questions about AB 1552 or business interruption insurance practices in California, please contact Ryan Greenspan 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.**

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.**

First Decisions on Application of Insuring Agreement to Business Interruption Claims During COVID-19 Pandemic

Posted on: August 28th, 2020

By: David Slocum

In the months since the COVID-19 pandemic began, thousands of claims and lawsuits have been initiated by businessowners seeking coverage for alleged property damage and business losses based on the impact to their businesses. From restaurant owners, to magazine publishers, to minor league baseball teams, a wide range of businesses argue business interruption insurance policies should cover business losses following government-ordered lockdowns and restrictions on large gatherings. Businessowners filing such lawsuits generally contend their businesses have been interrupted through no fault of their own, and that the business interruption insurance should cover their losses.  

Lawsuits filed by businessowner policyholders around the country generally argue their property has been impaired and that the loss of functionality resulting from governmental lockdown orders (as distinct from the virus itself) should qualify as “direct physical loss of or damage to” the property.

In one of the first judicial rulings on the issue, Circuit Court Judge Joyce Draganchuk of Ingham County, Michigan recently held business interruption insurance does not provide coverage for such losses. Nick Gavrilides, owner of the Soup Spoon Cafe in Lansing, Michigan had sued his insurer, Michigan Insurance Company, a subsidiary of Donegal Group Inc., which had denied Mr. Gavrilides’ $650,000.00 business interruption claim.  The policy at issue contained a provision requiring “direct physical loss of or damage to the [insured’s] property” as one of the elements necessary to establish business interruption coverage. The policy also contained an exclusion providing the insurer “will not pay for loss or damage caused by or resulting from any virus, bacterium, illness or disease.”

Michigan Insurance argued business interruption coverage under the policy requires a physically destructive event that alters the structural integrity of the policyholder’s property. Mr. Gavrilides argued that the Michigan governor’s stay-at-home order interfered with the use of his property and that the extraordinary circumstances of the pandemic call for new interpretations of what “direct physical damage” means for businessowners. 

Ruling from the bench during a virtual hearing, the judge sided with the insurer and held that the plain language of the policy requires tangible physical damage to property in order for business interruption coverage to apply. The judge explained:

[I]t is clear from the policy … that only direct physical loss is covered. Under their common meanings and under federal case law … direct physical loss of or damage to the property has to be something with material existence, something that is tangible, … something that alters the physical integrity of the property. The Complaint here does not allege any physical loss of or damage to the property.

The judge stated that because COVID-19 had not physically affected the structure of the property, there was no point allowing Mr. Gavrilides to file an amended complaint. Mr. Gavrilides has filed an appeal. Because the insuring agreement did not apply in the first instance, the court never reached the question of whether the “virus, bacterium, illness or disease” exclusion applied.

The ruling in May of this year in Social Life Magazine Inc. v Sentinel Insurance Co., Ltd. also held there is no coverage for claimed business losses without actual tangible impact to the physical property.  In Social Life Magazine a federal judge in New York denied a magazine publisher’s motion seeking a declaratory judgment that business interruption insurance should cover income lost due to a government-ordered COVID-19 lockdown. The policyholder has appealed. 

Decisions on COVID-19 claims are continuing, and the stakes are high for businessowners and insurers. The outcome in any individual case should, of course, depend on the specific language of the applicable insurance policy and the evidence presented. If, as in the Gavrilides and Social Life Magazine decisions, the courts construe the policy language as written, the mere loss of use of a businessowner’s property is not sufficient to show the insuring agreement applies. 

If you have questions or would like more information, please contact David Slocum 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.**