Language in Emergency Orders Gives Ammo to Plaintiffs in Business-Interruption Suits

By Jim Sams | May 13, 2020

Cities and counties across the country may have handed plaintiff’s attorneys an argument to use in lawsuits against insurers that seek business-interruption coverage for losses caused by coronavirus closure orders.

Jurisdictions as far asunder as Los Angeles, Calif. and Key West, Fla. include verbiage about “property loss” or “damage” in emergency directives that explain the reasons that businesses are being ordered to shutter. Those orders, in turn, are being cited in lawsuits that seek to persuade the court that coronavirus has caused property damage, which triggers business-interruption coverage.

Chris Cheatham, owner of analytics software provider RiskGenius in Overland Park, Kansas, noted in a blog post earlier this month that the language had been used by communities across the nation. He even built an interactive map that links to city, county and state emergency orders and ranks them as either low, medium or high risk to insurers.

The highest risk? Orders that say coronavirus causes property damages. Orders that mention property damage, but don’t make a direct statement about what is causing it, are tagged as low or medium risks.

Defense attorneys widely dispute the notion that a virus can be construed as physical damage to property that merits coverage, even in policies that don’t specifically exclude coverage. Many plaintiff’s attorneys say otherwise and are itching for a courtroom showdown.

“Please keep in mind that I am not declaring any particular language will or will not result in a valid claim or successful litigation,” Cheatham wrote in his blog. “I am pointing out government language that I believe will be used (and is already being used) by attorneys to support claims and litigation for COVID-19 business interruptions.”


Cheatham said it’s clear that a plaintiff’s attorney had a hand in placing such language into at least one emergency order. He pointed to a news article in the Keys Weekly that explained how the term “property damage” ended up in a March 21 emergency directive by Key West Mayor Teri Johnston and City Manager Greg Veliz.

Attorney Darren M. Horan told the newspaper that he suggested the language during a meeting that was attended by City Commissioner Clayton Lopez, who relayed the message to City Attorney Shawn Smith. Horan said such language is important for policyholders who have insurance either for business interruption or orders by civil authorities because there is no coverage without property damage, according to the report.

Neither Smith nor Lopez could be reached for comment. Horan, however, responded to an email from the Claims Journal.

Horan said during his meeting with Commissioner Lopez, he offered a copy of an emergency order issued by New Orleans Mayor Latoya Cantrell. The order says the coronavirus causes property damage because of its “propensity to attach to surfaces for long periods of time.”

That order was cited in what may have been the first lawsuit by a business owner seeking coverage for coronavirus-related closure: a complaint filed in Orleans Parish by Attorney John W. Houghtaling on behalf of the owner of the Oceana Grill in New Orleans. Houghtaling is seeking a state court declaration that his client is owed business-interruption coverage.

The interactive map with Cheatham’s blog post shows that the “propensity to attach to surfaces” language was used in several similar emergency orders by local governments in Florida.

One of them is an emergency resolution by the Board of Commissioners for Pinellas County, which says the virus has a “propensity to attach to to surfaces” and is “causing property loss or damage in certain circumstances.”

County Attorney Jewel White said she and her staff came up with that language on their own, with no input from any plaintiff’s attorneys. White said the state statutes that the county relies on to use emergency powers specifically mention the protection of property. Typically in Florida, such emergency declarations are issued because of hurricanes, she said.

White said she did not personally draft the order, but she and her staff were concerned about the impact of the COVID-19 outbreak on businesses, particularly on long-term care facilities. She said she’s not an insurance expert and was not aware that the language would have any impact on the viability of business-interruption claims.

“We were trying to invoke everything we could, to give us as broad authority as possible,” she said.

The Ogletree Deakins law firm maintains a directory of emergency orders by state government and some local jurisdictions. A review of that database shows that property damage is not mentioned in most of the statewide closure orders by governors or state health officers.

Orders by Louisiana Gov. John Bel Edwards and West Virginia Gov. Jim Justice are exceptions. Both mention property, but with far less detail than a number of the local orders.


California Gov. Gavin Newsom was the first in the U.S. to issue a statewide stay-home order on March 19. Executive Order N-33-20 makes no mention of property damage.

But many local orders do, typically within a series of paragraphs that start with “whereas.”

An emergency order issued by Los Angeles Mayor Eric Garcetti states that COVID-19 “is physically causing property loss or damage due to its tendency to attach to surfaces for prolonged periods of time.”

Garcetti’s order was cited in a lawsuit filed by the Simon Wiesenthal Center in Los Angeles against the Chubb Group of Insurance Companies seeking coverage for income losses from event cancellations and the closure of its facilities. The center operates the Museum of Tolerance, as well as a film production company and educational programs. Houghtaling represents the center.

Similarly, a March 18 order by Napa County health officer Karen Relucio discusses “physical damage to property caused by the virus.”

That order was cited in a lawsuit filed by renowned chef Thomas Keller against The Hartford seeking coverage for business-interruption losses from his two Napa County restaurants. Houghtaling is assisting with Keller’s lawsuit.

Steven Badger, an insurance defense attorney with the Zelle LLP law firm in Dallas, said the origin of the property damage language is clear.

“There’s no secret that the language was added in several initial emergency orders at the request of plaintiffs’ lawyers, with other municipalities then simply copying the same language,” he said in an email.

Badger also said the wording of emergency orders will not control whether a policy must respond under the civil authority coverage.

“Civil authority coverage is intended to apply when access to covered property is prohibited due to physical damage to a nearby property, such as a fire or building collapse,” he said. “Here, there was no physical damage to nearby property. It is clear that the primary cause of local COVID-19 emergency orders was the desire to stop the spread of the virus in people — to flatten the curve — and not due to any actual physical damage to property that had already occurred.”

About the photo: The Oceana Grill, shown here, is one of many restaurants suing to collect losses from coronavirus closure orders.

About Jim Sams

Sams is editor of the Claims Journal, which is part of the Wells Media Group. More from Jim Sams

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