The Key to Winning COVID Business-Interruption Claims: Say the Virus is Present

By Jim Sams | November 23, 2020

  • November 23, 2020 at 1:33 pm
    Roy A Mura says:
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    Thanks for the mention, Jim. Allow me to clarify or correct a few points attributed to me:
    >> I have no personal knowledge of why any insurance company that uses ISO forms does not include the ISO CP0140 virus exclusion in its commercial property policies. One reason may be that such a company didn’t think they need it, because a virus on a surface doesn’t itself cause direct physical loss or or damage to that item.
    >> What I said about policyholder attorneys’ efforts to find the proverbial “smoking gun” in ISO’s dusty basement is that I suspect they will be disappointed. ISO wrote this in July 2006, when it filed its virus/bacteria exclusion: “While property policies have not been a source of recovery for losses involving contamination by disease-causing agents, the specter of pandemic or hitherto unorthodox transmission of infectious material raises the concern that insurers employing such policies may face claims in which there are efforts to expand coverage and to create sources of recovery for such losses, contrary to policy intent.”
    >> I said that it’s much easier to allege virus on premises than it is to prove it, and that I also suspect most policyholders will be completely unable to prove such a thing (which is their burden) and avoid summary judgment, even if they were or are able to survive the insurer’s pre-answer motion to dismiss.
    >> The 11th Circuit’s Mama Jo’s precedent (i.e., something that can easily be cleaned is not lost or damaged within the meaning of the policy’s “direct physical loss of or damage to” property insuring agreement language) has already been cited by several federal courts to, in part, doom these COVID-19 business interruption claims. The cleaning and period of restoration arguments are tough for policyholders to circumvent on the issue of whether the presence of the coronavirus alone is direct physical loss of or damage to property.
    >> Notwithstanding Chip Merlin’s opinion of what’s absurd in all of this, he knows, along with everyone else whose jobs intersect with property insurance coverage, that it is and has always been the policyholder’s burden to prove in the first instance–even before exclusions are reviewed–that a covered loss has occurred. What would be absurd would be to ignore or flip that burden to insurers just because Chip thinks public policy demands doing so for his clients’ COVID-19 business interruption claims. If policyholders (or policyholders’ attorneys) think the “key to winning COVID business interruption claims” is to say in their complaints or first amended complaints or second amended complaints that “the virus was present”–as the title of this article suggests (and by winning, I presume you means surviving a motion to dismiss, right Jim?)–then policyholders presumably have (1) a good faith basis to allege such a thing and (2) evidence to prove it. They are the ones making the claims for BI coverage, after all.

  • November 23, 2020 at 5:34 pm
    The Man In Black says:
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    “Once the virus adheres to a property, the physical structure of that property has changed,” he said.

    That’s like saying that wearing black has a slimming effect because it alters fat cells in the human body.

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