As many businesses begin to return to normal, some have launched litigation against their insurance companies for damages incurred by the pandemic. Many of these are based on lost of income and closures resulting from the state-imposed lockdowns. Each state has taken different views on this issue, but the commonality is that they all center on what constitutes as property damage in a property insurance.
In Birmingham Alabama, the court ruled that physical damage does not have to be visible to qualify as property damage in a business interruption claim. In Serendipitous LLC/Melt, et al v. Cincinnati Insurance Co. The plaintiffs argued that because of COVID related shutdowns that last for an extended period, they had suffered physical damages. The insurance carrier countered they never identified what was considered damages to the physical restaurant. The Court disagreed with the argument. “The policy language indicates that the insurer understands that an insured may suffer physical loss without physical alteration because the policy excludes from coverage some expenses incurred because of invisible substances like vapor and fumes…Cincinnati could have excluded invisible substances like viruses but did not.”[1]
Alabama’s ruling shows that many states have different interpretations of how COVID losses are being defined. As more states reopen, these lawsuits are expected to continue to grow and each court case will be handled differently. As these cases continue to make their way through the courts, we believe that very slight differences in the polices may affect the outcome. We will keep you posted as further developments arise.
[1] Business Insurance June 2021, Page 12,
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