Insurers won a pair of big business interruption lawsuits last week, continuing a mostly successful defense against paying pandemic business claims.
In California, U.S. District Magistrate Judge Jacqueline Scott Corley ruled in favor of the insurance industry on pandemic-related business interruption claims—filed by attorneys representing two Napa Valley-based French restaurants—on the basis that the virus exclusion precludes coverage for losses caused by the COVID-19 pandemic.
"While the court acknowledges the havoc that the COVID-19 pandemic and consequent shelter-in-place orders have caused businesses throughout this country and the world, the court cannot read an ambiguity into an insurance contract where none exists," Judge Corley said.
This California ruling adds to the growing list of favorable rulings over the last year affirming insurers' position that global pandemic risks are uninsurable.
"Insurers are doing what they can in response to the pandemic, including providing premium rebates, policy extensions, and making charitable donations, as they work to keep their promises to policyholders for covered losses," said the Future of American Insurance and Reinsurance, an initiative of the Insurance Information Institute.
There are still hundreds of lawsuits pending and insurers have said costs could run into the billions if they were held responsible for businesses closing down.
Many of the suits claim that coverage for “direct physical loss or damage to property” was triggered by shutdowns ordered by civil authorities. In other words, the shutdown orders caused the business owners to suffer a “direct physical loss” of the use of their properties.
So far, most judges have rejected that argument and dismissed cases before they can advance to a jury trial.
In Pennsylvania, the owners of restaurants Stove and Tap and Al Pastor lost their bid to force the Hartford to pay for losses from pandemic-related closure orders, a federal judge ruled.
The restaurants admitted the coronavirus wasn't present at their locations and, therefore, are not covered, U.S. District Judge Mitchell S. Goldberg ruled. Government shutdown orders didn't cause the properties to be either "uninhabitable or unusable for their intended purpose," he added.
"I am fully aware that my ruling may unfortunately present an obstacle in the path to recovery for plaintiffs' businesses," Goldberg ruled. "That said, I must, of course, reach the result that is consistent with the insurance contracts at issue and applicable jurisprudence."