(Article from Insurance Law Alert, December 2020)
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Over the past month, more than 30 courts across the country have issued rulings in lawsuits in which policyholders seek insurance coverage for Covid-related business losses. The overwhelming majority of courts have dismissed the policyholders’ complaints as matter of law, finding that economic losses stemming from business interruptions do not satisfy the “direct physical loss of or damage to property” requirement of general liability policies. A substantial number of courts have also concluded that civil authority coverage is unavailable because government orders have not prohibited access to insured premises and because property located in close proximity to the insured premises has not been physically damaged. Among these rulings were two decisions issued by federal courts in the Southern District of New York. See Michael Cetta, Inc. v. Admiral Indem. Co., 2020 WL 7321405 (S.D.N.Y. Dec. 11, 2020); 10012 Holdings, Inc. v. Sentinel Ins. Co., Ltd., 2020 WL 7360252 (S.D.N.Y. Dec. 15, 2020). Other courts have dismissed complaints based on the presence of a virus exclusion in the governing policy. Virtually all courts have rejected policyholders’ regulatory estoppel arguments, finding no basis in fact or law for application of the doctrine.
A small minority of courts have declined to dismiss policyholder’s suits on the pleadings, citing ambiguity in policy language or factual issues in dispute. See JGB Vegas Retail Lessee, LLC v. Starr Surplus Lines Ins. Co., 2020 WL 7258108 (D. Nev. 30, 2020); Elegant Massage, LLC v. State Farm Mutual Auto. Ins. Co., 2020 WL 7249624 (E.D. Va. Dec. 9, 2020).
Finally, judicial panels granted motions to centralize proceedings in multidistrict litigation in New York and Pennsylvania. The New York MDL involves lawsuits alleging that an insurer is obligated to pay for trips cancelled because of Covid. The Pennsylvania MDL involves individual and putative class action cases alleging that the insurer wrongfully refused to cover business income loss due to Covid-related government orders. See In re: Generali COVID-19 Travel Ins. Litig., 2020 WL 7382300 (U.S. Jud. Pan. Mult. Lit. Dec. 15, 2020); In re: Erie COVID-19 Bus. Interruption Protection Ins. Litig., 2020 WL 7384529 (U.S. Jud. Pan. Mult. Lit. Dec. 15, 2020).