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By: Philip W. Savrin and Erin Lamb
The first in what is bound to be a virtual tsunami of coverage lawsuits arising from the spread of the Coronavirus was filed in New Orleans this week by a restaurant in the famed French Quarter. In its complaint, Oceana Grill seeks a declaration that the government’s orders to close down the business will trigger coverage for losses it anticipates it will sustain as a result of a government-mandated suspension of its operations. As in many policies, coverage is provided for the loss of net income that results from a “direct physical loss” to the insured’s property. In the lawsuit, the restaurant alleges that “any effort … to deny that the virus causes physical damage and loss would constitute a false and potentially fraudulent misrepresentation that could endanger policyholders and the public.”
This argument, which we predict will become central to insurance coverage disputes throughout the country, was supported by the Mayor of New Orleans who publicly stated that she will be “very aggressive” when it comes to business interruption claims. Indeed, in her emergency declaration, Mayor Cantrell stated explicitly that Covid-19 “causes property loss and damage in certain circumstances.”
Whether interruptions to business operations are covered by policies that require a direct physical loss to property will depend on the particular language of each policy and the application of the terms may vary as well depending on the jurisdiction. In addition, policyholder advocates are turning to state legislatures for assistance in mandating insurers to cover losses particularly where closures are mandated by local governments. The only thing that is certain at this point is Covid-19 is going to impact virtually every industry and on a global scale, with many lawsuits being filed by businesses asserting novel arguments to cover their mounting losses.
The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.
FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.
You can also contact your FMG relationship partner or email the team with any questions at firstname.lastname@example.org.