SDV surveys

COVID-19 Business Interruption Insurance Litigation by the Numbers: Major Takeaways and Trends for 2022

Last updated on: January 5, 2022

Since the start of the pandemic, SDV has actively tracked nationwide lawsuits filed by policyholders against their insurers for coverage of COVID-19-related losses. After nearly two years and thousands of lawsuits, SDV has created the below on the status of COVID-19 business interruption litigation, including insights into the courts' decisions, with an eye toward future trends.


Major Takeaways

According to SDV's COVID-19 Insurance Coverage Litigation Tracker, over 1,400 lawsuits have been filed since March 2020 in state and federal courts. During this time, SDV reviewed and analyzed over 600 trial and appellate court decisions and observed the following:

  • Federal courts have issued more decisions than state courts, around 70% and 30%, respectively.
  • Carriers won in over 90% of the cases.
  • Policyholders are more likely to prevail in cases without virus exclusions, with carriers winning 85% of the time.
  • Policyholders have been more successful in state court than federal court. Insurers have won in around 95% of the cases decided in federal court and 72% of the cases decided in state court.
  • Appeals have been filed in over 300 cases. Almost all were filed by insureds who had their cases dismissed. There are over 230 appeals currently pending in federal courts and around 70 in state courts.
  • 18 Appellate Court decisions have been released thus far, 15 of which were issued by federal circuit courts-the Second, Sixth, Eighth, Ninth, Tenth, and Eleventh Circuits-and 3 by state courts-2 in Ohio, and 1 in California. None of these decisions were favorable to policyholders.
  • Certain jurisdictions have been more favorable to insureds, above all, the state of Ohio, where policyholders succeeded in 30% of the cases. Other favorable jurisdictions include the state of Washington, where policyholders won 13% of the cases, and the state of Oklahoma, in which the courts granted two policyholders' motions for summary judgment.
  • Over one-third of the cases have been filed by businesses in the hospitality and food service industries.
  • Two cases have gone to trial, in both instances resulting in a judgment in the insurer's favor.1
  • The Hartford, Cincinnati Financial, and Zurich Insurance Group have the most business interruption claims filed against them, making up 26.1% of all cases combined.

Most Litigated Issues

By and large, the courts have focused on two central issues: 1. Whether the presence of the virus on an insured's property qualifies as a direct physical loss or damage, and 2. Whether a virus exclusion bars coverage for business interruption related to the COVID-19 pandemic.

Most courts have found that COVID-19 exposure does not constitute direct physical loss or damage because an insured must demonstrate "some physicality" to the loss or damage of property. However, some policyholders have successfully argued that the virus may physically alter the property on a microscopic level, and some courts have considered that fact pattern, if proven, sufficient to establish "physical loss" In these cases, "direct physical loss" was interpreted to mean "the act of losing possession" and "deprivation." For example, at least one court found that a policy's use of the disjunctive "or" between the terms "physical loss of" and "damage to property" meant that the drafters intended for the terms to be considered differently.

Courts have consistently found that virus exclusions, which concern damage caused by "any virus, bacterium, or other microorganisms," bar coverage for COVID-19 related losses. Due to the broad nature of these exclusions and their applicability to direct and indirect causes of loss, insureds were more successful when their policies did not contain a virus exclusion. Although courts usually consider these exclusions as "plain and unambiguous" in language, at least once a policyholder successfully argued that a virus is not unambiguously understood to be a "microorganism."


An Eye to the Future

Although policyholders were not able to prevail in most recent cases, the landscape of COVID-19 business interruption litigation is not yet fully determined. The federal courts have been consistent in holding that the virus does not cause any direct physical loss. However, no state appellate level courts have yet issued a decision on this question.

A case that may shape future COVID-19 business interruption litigation is currently pending in the Ohio Supreme Court6 regarding whether COVID-19 exposure constitutes direct physical loss or damage to insured property. Because of the centrality of this issue, the court's decision will likely be influential in determining future trends not only in Ohio but also throughout the country. Despite trends currently favoring insurers, it will take years to fully resolve the issues associated with COVID-19 business interruption insurance litigation.

SDV remains at the forefront of policy interpretation issues and filed an Amicus Brief in November 2021 as an advocate for policyholders nationwide in the matter of 1 S.A.N.T., Inc. v. National Fire & Marine Insurance Company, 513 F.Supp.3d 623 (W.D.Pa. 2021) and the related consolidated cases. In its brief, SDV argued that recent COVID-19 decisions requiring structural loss or physical alteration to covered property threaten to upset coverage law that had been otherwise settled for over a generation. SDV is dedicated to ensuring that policyholder interests are represented and protected in connection with COVID-19 litigation. You can click here to learn more about our firm's Amicus Brief filing


Footnote:

This webpage was last updated on January 5, 2022. To find more current information regarding COVID-19 litigation, we recommend visiting the COVID Coverage Litigation Tracker on the University of Pennsylvania's website




435 Dismissed with Prejudice Rulings
61 Re-File Complaint Rulings
44 Moves Forward to Discovery Rulings
9 Policyholder Wins - Summary Judgment Granted
32 Carrier Wins - Summary Judgment Granted

Click on the state(s) below for more detail

State rulings exist        No coverage rulings


Disclaimer: This material is made available for general informational purposes only. The information provided in SDV's "Daily COVID-19 Update" is indicative only and non-exhaustive. Readers are advised to independently verify the information contained herein. This material is not intended to, and does not constitute, legal advice, nor is it intended to constitute a solicitation for the formation of an attorney- client relationship. Please note, SDV does not represent any parties mentioned within the "Active Cases" section of this update.


Disclaimer: This material is made available for general informational purposes only. The information provided in SDV's "Coverage Rulings by Insurance Group" is indicative only and non-exhaustive. Readers are advised to independently verify the information contained herein. This material is not intended to, and does not constitute, legal advice, nor is it intended to constitute a solicitation for the formation of an attorney-client relationship. Please note, SDV does not represent any parties mentioned within the "Coverage Rulings by Insurance Group" section of this update.





New Jersey Court See's Potential in Optical Services COVID-19 Coverage Suit

In Optical Services USA/JCI v. Franklin Mut. Ins. Co.,1 the New Jersey Superior Court denied the insurer's motion to dismiss the policyholders' COVID-19 coverage suit. The Plaintiffs in this case were optometrists' offices forced to close by New Jersey Governor Phil Murphy's Executive Order No. 107, which temporarily shut down non-essential businesses to help slow the spread of COVID-19 in New Jersey.

Read More +

The Future of Pandemic Coverage for Real Estate Owners and Developers

Shutdowns resulting from the COVID-19 pandemic have prompted an unprecedented number of business income and business interruption insurance claims. Many claims have resulted in litigation and require judicial intervention to determine whether private insurance carriers owe policyholders indemnification for pandemic related losses.

Read More +

Fungi, Wet Rot, Dry Rot and "Virus": One of These Things is Not Like the Other

The Hartford's so-called virus exclusion in its commercial property forms is getting a workout, and policyholders now have an argument that may help their cases move past the pleadings stage. A U.S. District Court in Florida has deemed the exclusion ambiguous and denied an insurer's motion to dismiss.

Read More +

Preventing Pitfalls in Policyholder Pandemic Pleadings: Lessons Learned from Recent Restaurant Rulings

Recently, federal courts in California and Florida dismissed claims brought by restauranteurs against their insurance companies after the insurers denied business-interruption coverage for losses related to COVID-19 quarantine orders. In both cases, the courts held that the policyholders had not sufficiently alleged that their properties had suffered "direct physical loss or damage," as required by both policies to trigger coverage.

Read More +

U.K. High Court COVID-19 Victory for Policyholders May Set a Trend in the U.S.

On September 15, 2020, in a matter entitled The Financial Conduct Authority v. Arch & Others1, the High Court of Justice of England and Wales, the equivalent of a trial court in the U.S., issued a ruling on a COVID-19 business interruption insurance case (the "Judgment"). Significantly, the Court sided with policyholders on most key coverage issues under specific non-damage business interruption insurance coverage forms

Read More +

Required Disclosures and Notifications of Employee COVID-19 Exposure

As businesses reopen amid rising COVID-19 cases, employers must navigate through the hurdles of maintaining a safe workplace during a pandemic.

Read More +

The Next Wave: COVID-19 Workers Compensation and General Liability Claims Likely to Spike

To state the obvious, the global "COVID-19" pandemic has resulted in substantial financial losses for many businesses and furloughed workers. Forced shutdowns, lower consumer demand, and reduced capacity/shortened hours of operation have translated to lower revenues for many companies, causing them to make hard decisions. These tough choices include cost-cutting measures (layoffs or furloughs), bankruptcy restructuring, or even permanent closure.

Read More +

COVID-19 Win for Policyholders! Court Approves

A Missouri federal district court recently provided a significant victory for insurance policyholders for COVID-19 losses. In Studio 417, Inc. v. The Cincinnati Insurance Company 6:20-cv-03127-SRB (W.D. MO, So. Div., Aug. 12, 2020), the Court was called upon to decide whether allegations involving the presence of COVID-19 in and around physical structures qualifies as "direct physical loss or damage" to covered property.

Read More +

Event Cancellation Insurance During the COVID-19 Pandemic: Key Strategies

The COVID-19 pandemic has led to an unprecedented number of event cancellations ranging from travel and tourism, hotel and hospitality, corporate conferences, outdoor festivals, as well as many other events. By far, one of the largest industries impacted by COVID-19 is the hospitality industry.

Read More +

State Initiatives to Expand Workers' Compensation for COVID-19

In response to the COVID-19 pandemic, numerous states have mounted initiatives to expand access to Workers' Compensation benefits for workers affected by COVID-19, with new states joining every day. Among the states that have addressed the issue to date are Alaska, Arkansas, California, Florida, Illinois, Kentucky, Louisiana, Massachusetts, Michigan, Minnesota, Missouri, New York, New Jersey, Pennsylvania, Ohio, Utah, Vermont, Washington, and Wisconsin.

Read More +

COVID-19 Insurance and Nonprofits: The Case for Coverage

The cancellation of events producing income, galas and other fundraising events, the furloughing and quarantining of employees and volunteers, and the prospect of possible third-party liability claims have all caused considerable financial strains for many nonprofit entities, in recent weeks, thanks to the COVID-19 crisis. Insurance coverage can help nonprofits weather the storm but getting past initial insurer denials or reservations of rights can require both know-how and considerable work.

Read More +

COVID-19 Shutdown? Beware of the Vacancy Provision in your Property Policy!

As the nation responded to the COVID-19 pandemic, bars and restaurants across the nation were shut down by local or state edict with no known re-opening date in sight. Beware of the (no) vacancy provision! Almost every commercial property policy has some variation of a vacancy or unoccupancy provision.

Read More +

COVID-19 Related Exposures Facing Franchise Systems

Most franchise systems are facing severe financial impacts as a result of the continued spread of COVID-19 and the numerous government-mandated shutdowns that have been ordered by state and local officials in response. Even if your franchised operations are considered essential and able to remain open during the shut-down, franchisees may have exposures, in addition to a loss of revenue, which may further impact franchisors.

Read More +

Ontario Court Finds Coverage for Business Interruption Under an "All-risk" Policy; Gives Hope to Policyholders with COVID-19 Loss-of-Use Claims

On March 30, 2020, the Ontario Superior Court of Justice released its opinion in the MDS, Inc. et al v. Factory Mutual Insurance Company case. While the case is favorable to policyholders with business interruption claims under "all risk" policies, attorneys representing policyholders are particularly excited as Justice Wilson's adoption of broad interpretation of "resulting physical damage" may be very useful in pursuing coverage for business interruption losses related to COVID-19 exposures.

Read More +

Zoom-Bombing Leads to Securities Suit: Assessing D&O Coverage for Event-Driven Securities Class Action Suits in the Wake of COVID-19

COVID-19 has impacted businesses large and small across the country. Some companies predict that their services or products will be in higher demand, and anticipate marked financial success in the coming months, while others brace for collapse. Either scenario creates a potential liability: the risk of misrepresentation or improper disclosure to investors about the company's outlook, financial health, capabilities, or any information that influences investor decisions.

Read More +

COVID-19 Business Interruption Battle Continues: Florida Insureds File Suit Joining the Fight for Coverage

Several businesses have commenced litigation in Florida against first-party commercial property insurers seeking coverage for business interruption losses resulting from state and local government orders enacted to mitigate the spread of COVID-19.

Read More +

Are COVID-19 Claims Covered by Builders Risk Insurance Policies?

If you are an attorney, insurance broker, or other professional representing developers and contractors, then your clients have likely reached out with concerns about losses related to COVID-19. One common question is whether there is potential coverage under builders risk insurance policies.

Read More +

Louisiana, Pennsylvania and South Carolina Consider Legislation to Insure Coverage for COVID-19 Business Interruption Losses

Louisiana, Pennsylvania and South Carolina are considering legislation that would mandate coverage under property policies for business interruption losses resulting from the COVID-19 pandemic. These states join the growing group of states that are considering enacting such legislation, which now includes New Jersey, Massachusetts, Ohio and New York.

Read More +

Policyholders Claim Bad Faith in COVID-19 Litigation

When submitting an insurance claim for losses due to COVID-19, the policyholder's rightful expectation is that their insurer will handle their claim fairly and in good faith. However, a growing collection of lawsuits allege that certain insurers are not living up to this expectation and are denying coronavirus-related claims in bad faith.

Read More +

Congress Considers Pandemic Risk Insurance Act to Address COVID-19 Business Interruptions Losses

The draft legislation, entitled the Pandemic Risk Insurance Act of 2020 ("PRIA"), would establish a Federal Pandemic Risk Reinsurance Fund and Program (the "Program"), that is intended to provide a system of shared public and private compensation for business interruption ("BI") losses resulting from a pandemic or outbreak of communicable disease.

Read More +

Illinois Insureds are Contesting One Carrier's Universal Denial to Covid-19 Losses

In response to the large number of COVID-19-related losses that businesses are experiencing, insurers have begun issuing statements informing their insureds of whether their policies will respond to the losses, and if so, what coverage will be afforded. Insurers cannot take a "one-size-fits-all" approach to the COVID-19 losses because, besides factual differences, the losses are occurring within all fifty states which means 50 different state law interpretations will apply.

Read More +

Advice for Providing Notice for D&O Policies Renewing During the COVID-19 Pandemic

As the COVID-19 pandemic affects companies' economic performance, we anticipate an uptick in Directors & Officers (D&O) Liability claims. Attempts by companies to downplay the effects of supply-chain disruptions or overall performance due to shutdowns are potential minefields for D&O claims

Read More +

French Laundry Spices Up COVID-19 Business Interruption Debate

On March 26, 2020, Michelin-rated Napa Valley restaurants, French Laundry and Bouchon Bistro, and their celebrity chef, Thomas Keller, filed the second known coronavirus-related declaratory judgment (DJ) lawsuit by a restaurant. The restaurants filed their DJ against Hartford Fire Insurance Company just seven days after Napa County issued a Shelter at Home Order.

Read More +

Protection of Property/Sue & Labor Coverage May be Available for Coronavirus Costs

One aspect of many first-party property insurance policies that has been largely overlooked in association with the recent Coronavirus outbreak is protection of property coverage. Protection of property coverage, which can be found as a coverage extension or even as a condition in the policy, can take a variety of forms, but generally provides coverage for costs incurred to temporarily protect and preserve the insured property.

Read More +

Virus Exclusion? - Don't Abandon Hope for Coverage Just Yet

Companies across all industries have been deeply impacted by the social-distancing protocols and economic slowdown caused by the COVID-19 pandemic. Naturally, competent business owners have looked to their commercial business and property insurance programs to determine what coverage, if any, they may have to offset the financial losses being suffered. To their dismay, many such entities have discovered that their policies specifically exclude losses related to virus.

Read More +

New York Joins New Jersey, Massachusetts and Ohio in Discussing Legislation That Would Require Property Insurers To Pay COVID-19 Business Interruption Claims

If approved, New York Draft Assembly Bill A10226 (the "Bill") would require property insurers to cover business interruption losses resulting from the COVID-19 pandemic. The Bill would have immediate retroactive effect applying to property policies containing business interruption and loss of use and occupancy coverage, and in force on March 7, 2020, the date Governor Cuomo declared a State of Emergency.

Read More +

Two More Insureds Ante Up: Oklahoma Tribes Step Up to the Business Interruption Table

On Tuesday, March 24, 2020, the Chickasaw and Choctaw Nations (the "Nations"), located in Oklahoma, filed separate business interruption coverage lawsuits against their collective group of insurers who allegedly issued "all risk" policies to both Nations.

Read More +

Massachusetts and Ohio Join the Effort to Insure COVID-19 Business Interruption Losses

On March 24, 2020, the Massachusetts and Ohio legislatures proposed bills that would provide insurance coverage to small businesses for business interruption losses sustained during the COVID-19 pandemic. These new developments come less than two weeks after New Jersey became the first state in the nation to introduce legislation on this issue.

Read More +

An Insurance Checklist for the Hospitality and Commercial Real Estate Industries in response to the COVID-19 Pandemic

No person or industry in the world will go unaffected by the COVID-19 pandemic. Two related industries that are being hit the hardest are the hospitality and the commercial real estate industries. The hospitality industry is comprised of four segments: food and beverage (F&B), travel and tourism, lodging, and recreation. These four segments often overlap with each other and most segments overlap, to some extent, with the commercial real estate industry.

Read More +

COVID-19 Business Interruption Challenges

COVID-19 Business Interruption Challenges

Read More +

Can Insurers Retroactively Modify Policies to Exclude Coronavirus?

Every day brings new challenges and concerns as the world grapples with the novel coronavirus. Businesses are already looking to their insurance portfolio as a way to lessen the anticipated impact on their bottom line. Policyholder and insurer side litigators alike seem to agree that we will likely see coronavirus-related coverage issues litigated for years, long after the pandemic has been contained.

Read More +

Coverage Implications for COVID-19 Project Shutdowns

Boston's recent decision to temporarily shut down city construction projects has many in the industry asking what impact, if any, a COVID-19 related shutdown would have on project insurance.

Read More +

Crisis Coverage in Response to Coronavirus: Give Notice IMMEDIATELY

Read More +

COVID-19 Business Interruption Lawsuits Begin: Iconic Oceana Grill in New Orleans Files Insurance Coverage Lawsuit

On Monday, the iconic New Orleans restaurant, Oceana Grill, filed the first Coronavirus-related business interruption insurance coverage lawsuit in a US jurisdiction. The declaratory judgment action styled Cajun Conti, LLC, et. al. d/b/a Oceana Grill v. Certain Underwriters at Lloyd's, London was filed in Louisiana state court for the Parish of Orleans.

Read More +

To our Clients, Colleagues and Friends

Read More +

New Jersey Discussing Legislation That Would Require Property Insurers To Pay Coronavirus Business Interruption Claims

New Jersey is discussing draft legislation that would require certain property insurers to provide coverage for business interruption losses resulting from the Coronavirus pandemic. If approved, N.J. Draft Bill A-3844 (the "Bill") would have immediate effect and apply retroactively to insurance policies in force on March 9, 2020 that insure against loss or damage to property and include loss of use and occupancy and business interruption coverage.

Read More +

Policyholders' Coverage Checklist in Times of Coronavirus

The unprecedented social and economic impact of the Coronavirus makes it necessary for policyholders to keep open all lines of communications with their insurance brokers, insurance carriers, financial advisors, safety & compliance experts, and insurance coverage counsel even if it is not certain whether they will need to file insurance claims.

Read More +

Coronavirus and Business Interruption Coverage for Policyholders

With a death toll of more than 2,700 and more than 80,000 infected, Policyholders' measures and governmental efforts to contain the spread of the Coronavirus has interrupted business and disrupted supply chains worldwide. Policyholders fearing the threat of the Coronavirus to their normal business operations should review if their first-party insurance would respond to the Coronavirus threat.

Read More +

CONTACT US


The email you are sending does not create an attorney-client relationship with SDV. We do not agree to representation until we have performed a check for conflicts of interest and expressly agree to provide services in a particular matter via an engagement letter. The information submitted to us via this website will NOT be treated as confidential or privileged as a lawyer/client communication and our receipt of this information does not prevent us from representing a client related to the subject of your inquiry.

Northeast

35 Nutmeg Drive
Trumbull, CT 06611

203.287.2100

233 Mount Airy Road
Basking Ridge, NJ 07920

973.446.7300

Southeast

999 Vanderbilt Beach Road, Ste 603
Naples, FL 34108

239.316.7244

West Coast

One BetterWorld Circle
Temecula, CA 92590

951.365.3145

SDV is headquartered in Connecticut, with regional offices in New Jersey, Florida, and California to better serve our clients. We are ready to answer your questions and are eager to assist you in developing solutions.