As COVID continues to wreak havoc many companies have turned to litigation, due to the COVID enforced closures. No industry felt these worse than the restaurant industry, where if they didn’t have a connection to delivery services, they could have ended up shutting their doors for good.
This is a trend that has spiked in recent months. According to the COVID Coverage Litigation Tracker at the University of Pennsylvania Carey Law School, more than 2,000 cases had been filed by businesses against insurers over COVID-related losses as of late September. About 73% of insurers' motions to dismiss decided by state courts have been granted, and about 93% in federal court, according to the tracker.(1)
In the state of Missouri, one particular case has reached the jury trial phase. In C. Hopps Ltd. v. Cincinnati Insurance Co., Case No. 4:20-cv-437 (W.D. Mo. 2021), the plaintiff, a Missouri restaurant owner sued their insurance carrier over damages. When everyone was forced to lockdown across the country, many businesses had to shut their doors or work remotely. Restaurants were among the biggest victims of these lockdowns as with limited social distancing in these places, many were forced to shutter either for months or in some cases shutter completely. Hopps’ operations were limited to delivery, drive-through, and carry-out services. Hopps submitted a claim to its insurer, Cincinnati Insurance Company, for coverage under its commercial property policy for “Business Interruption due to COVID-19,” and Cincinnati denied the claim. Hopps then filed suit against Cincinnati, seeking coverage under the policy’s Business Income, Extra Expense, Civil Authority, and Ingress and Egress coverage provisions. (2)
In a surprise ruling, the Missouri State Court sided with Cincinnati Insurance company. The court believed that the COVID-related closures did not meet the requirement for damages under their policy at the time. In the summary ruling the policy covered interruptions “caused by action of civil authority that prohibits access” to a premises other than covered property, provided that: (a) access to the area immediately surrounding the damaged property is prohibited by civil authority as a result of the damage; and (b) the action of civil authority is taken in response to dangerous physical conditions resulting from the damage or to enable the civil authority to have unimpeded access to the damaged property.” In short, even though the lockdowns preventing customers from entering the premises, the proprietor could and as a result, the business interruption clause would not have triggered.
This judgement is the first of many that will come from COVID related closures. Though many have been settled before reaching the bench, eventually there will be cases that will go to a jury trial and each state might have different rules on ruling for or against businesses. For more insights into COVID related interruptions: (3)