A Connecticut judge ruled that The Hartford did not owe coverage to designer footwear wholesaler Marc Fisher for more than $100 million in losses caused by COVID-19 business closures.
Waterbury Judicial District Judge Barbara N. Bellis ruled that government orders restricting access to retail locations did not constitute a direct physical loss of property and granted summary judgment in favor of the insurer. She said in a June 15 memorandum explaining her decision that Fishers’ package policy clearly excluded any loss caused by viruses and that there was no direct physical damage to property that would trigger coverage under its marine policy.
Although Fisher is headquartered in Connecticut, its marine policy required disputes to be resolved according to New York law. Bellis cited two New York court decisions in her memorandum that found the words “direct” and “physical” in an insurance policy narrow the scope of coverage to include only physical damage to the property itself.
“Labeling the policy as ‘all risk’ does not relieve the insured of its initial burden of demonstrating a covered loss under the terms of the policy,” Bellis wrote.
The case is notable because attorneys for Fisher, also know as Moda, were seeking access to Insurance Service Office documents to show that insurers knew before a standard virus exclusion was created in 2006 that policyholders would expect coverage if there was no exclusion. The effort to subpoena ISO documents continues in other lawsuits that are still pending.
Bellis is the latest in a legion of jurists who have ruled against policyholders seeking coverage for losses caused by government shutdowns to prevent the spread of SARS-CoV-2. According to a litigation tracker maintained by the University of Pennsylvania’s Carey Law School, state and federal judges have dismissed 347 lawsuits seeking coverage for COVID-related business interruption losses, compared to 49 cases where motions to dismiss were denied.
Plaintiffs have done better in state courts, where 33 cases were dismissed and 27 dismissal motions were denied, but the law school has less data about state court filings.
The Hartford filed suit seeking a declaratory judgment after Fisher and its affiliates filed a claim seeking coverage for $120 million that was lost when retailers canceled orders because of pandemic shutdowns.
Fisher’s attorney, Christine Montenegro with Kasowitz Benson Torres, attempted to compel theproduction of ISO documents related to drafting of the virus exclusion that is now standard in most commercial property insurance policies. Montenegro told the court that ISO notes show that ISO members, including the Hartford, knew that existing polices could potentially provide coverage for damages caused by viruses.
Bellis never ruled on Fisher’s motion. Instead, she issued an order granting Hartford’s request for a declaratory judgment.
Montenegro did not respond to a request for comment.
Policyholder attorney Chip Merlin, with the Merlin Law Group in Tampa, said he and other attorneys have been able to subpoena the ISO for documents related to the virus exclusion filing. He said his discovery efforts have produced 14,000 pages of documents, but he is now allowed to comment on them because of a protective order by the court.
Merlin said he believes that in every case where ISO has released documents, it did so under a confidentiality agreement.
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