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By: Lee Whatling
Last month, the Supreme Court of the United Kingdom clarified the applicability of 21 sample insurance policy wordings to business interruption losses resulting from the COVID-19 pandemic and actions taken by UK public authorities in response to the crisis. One of those policies covered: losses resulting solely and directly from an interruption to your activities caused by your inability to use the insured premises due to restrictions imposed by a public authority….
The Supreme Court ruled that an instruction from a public authority may amount to a “restriction imposed” when it is expressed in mandatory and clear terms to indicate that compliance is required “without the need for recourse to legal powers.” This holding broadened the lower court’s narrower determination that “restrictions imposed” are only those which carried the force of law through statute, as opposed to mere instructions by the government.
However, the majority of American courts are rejecting the broad interpretation adopted by the UK court. For example, the Northern District of Georgia in Henry’s La. Grill v. Allied Ins. Co. of Am., No. 1:20-CV-2939-TWT, 2020 U.S. Dist. LEXIS 188353, 2020 WL 5938755 (N.D. Ga. Oct. 6, 2020), interpreting different language, rejected coverage on the ground that the Georgia Governor’s Executive Order included no clear substantive provision prohibiting access to businesses.
As the pandemic evolves, it is important to assess any communication from a public authority regarding COVID-19 restrictions to determine, for coverage purposes, whether such communications have the force of law or are merely “instructions,” “recommendations,” or “advice.” Based on the decisions thus far, it appears unlikely that American courts will adopt the UK’s more insured-friendly approach.
For more information, please contact Lee Whatling at [email protected].
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].
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