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Navigating Insurance Coverage Questions in the Age of COVID-19

Posted on: March 30th, 2020

By: Katie Cusack

It is no secret that concerns about coronavirus and COVID-19 have impacted tens of thousands of businesses across the world.  In many industries, its effects are novel, and many businesses are unsure of what their obligations are at this time and whether their insurance policies will cover any losses stemming from the effects of the virus and the disease it causes.  Two insurance policy types are particularly relevant to questions related to COVID-19 – business interruption and event insurance.    

Business Interruption Insurance

Whether business interruption insurance providers will be obligated under contract to cover business losses resulting from COVID-19 depends largely on the precise language of the policy and the facts surrounding any loss.  Due to somewhat recent viral outbreaks across the globe, many policies include language to exclude coverage for losses stemming from viral outbreaks.  Litigation over this issue has begun.  In mid-March a New Orleans restaurant company filed for a judgment that losses due to government-mandated closures related to COVID-19 would be covered by its property and business interruption policy.  New Orleans restaurants at the time the suit was filed were instructed to limit seating capacity, but now may only offer carry-out, drive-through, or delivery services.  According to the complaint, the restaurant’s business interruption insurance policy does not include any exclusions for losses caused by viruses or global pandemics. 

Last week, on March 24, two Native American tribes in Oklahoma – the Chickasaw Nation and the Choctaw Nation – filed lawsuits in Oklahoma state court seeking declarations that their “all risk” property insurance policies cover their “losses and expenses related to the COVID-19 pandemic and infection” because “the United States of America became infected by COVID-19 resulting in a pandemic,” which is alleged to result in “direct physical loss or damage” to each Nation’s property.

On March 26, a California restaurant company also filed for a court judgment to confirm the restaurant’s insurance would cover losses resulting from COVID-19.  The restaurant company, French Laundry LP, claims it furloughed 300 employees after local authorities ordered individuals to stay at home.     

The outcome of these cases will of course depend on the terms and conditions of the insurance contract and the evidence.  

Event Insurance

Thousands of weddings, conferences, and other events across the country have been cancelled as a precaution against coronavirus and COVID-19.  As with business interruption insurance, whether coverage exists will be fact-specific.  And terms and conditions of event cancellation policies are often tailored to the specific event and its circumstances.  Many event insurance policies require a “necessary” cancellation or postponement for coverage to exist.  This will require close analysis of the cause – government-induced, fear-based, etc. – of a cancellation or postponement. 

The governmental restrictions on weddings, funerals, and general gatherings of individuals have varied from state-to-state, town-to-town, and within the same governmental area, day-to-day.  And in some places, gatherings have been permitted to go forward, but with a restriction on the number of participants.  Again, the policy language and the evidence should control the outcome. 

Pressure to Waive Coverage Exceptions

However, it is worth noting that there may be considerations outside of the language of an insurance policy and the factual situation surrounding a particular case.  Insurance providers may be pressured to make exceptions to their policies. 

In the case of medical insurance, some states have requested that providers waive certain costs for testing for COVID-19.  In addition, in other industries, some companies have waived conditions of a contract in the wake of the COVID-19 outbreak.  For example, certain airlines have waived change fees to allow customers to rebook their flights that were affected by COVID-19.    

The landscape changes daily, and it is important to understand the details behind the headlines.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include the CCPA, the CARES Act, Law Enforcement and the viruses’ impact on the Construction Industry. Click here to register.

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.** 

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