Across the country, claims for insurance revenues for their insurers have not lost their business rights and the suits that follow for business interruptions caused by COVID-19 and government closures have not gone well. Most policyholders who have been subject to a business suspension have been denied their insurance claims when they rely on insurance clauses covering "direct physical loss of or physical damage" at the policyholders' place of business. Similarly, when these denied claims become lawsuits, some courts have dismissed cases based on an interpretation that the coronavirus cannot cause property damage to the policyholder's place of business.
This did not turn out to be the case in the end in a new order from the USA. District Judge James R. Nowlin of Independence Barbershop LLC v Twin City and Fire Insurance Company . 1
Independence Barbershop filed a lawsuit. on May 22, 2020, applying for (1) a class certification and classification as a class representative; (2) damages for breach of contract; (3) an explanatory judgment, (4) interest before and after the judgment; and (5) law firms and costs. Twin City responded immediately and filed a Rule 12 (b) (6) motion to dismiss, arguing that the Virus approval of the policy constituted an exclusion of the alleged damages and disposed of all of the plaintiff's independence barbershop allegations.
Independence Barbershop responded to the motion to reject and gave three reasons for its denial. First that the virus label was designed to cover something other than the COVID-19 pandemic. Second, precludes regulatory estoppel application of Virus Endorsement to exclude plaintiff's claims. Third under section B.1.f. the virus regulation provisions included coverage for viruses specifically and stated that it allowed up to 30 days of coverage for business interruptions of "& # 39; loss or damage to property caused by … virus & # 39;" causes closure of the business and if "& # 39; Time element coverage applies. & # 39; 2
The court took up all three arguments and agreed with Twin City on the first two but stood behind the plaintiff In its third argument, in the plaintiff's second argument that regulatory estoppel should apply, the court found that only one state in the Union had recognized the doctrine of regulatory estoppel and Texas was in the overwhelming majority of states that had not recognized it.
Independence Barbershop third In his third argument, the plaintiff relied on a provision, Section B.1.f. of the Virus Endorsement, which, as mentioned above, specifically covered up to 30 days of virus coverage. 3 In connection with this third argument, the court first declared that "Time Element Coverage" is a term for art in the insurance industry that refers to coverage measured in time, including business interruptions, at which time the court did not agree with Twin City's television on the argument that: (1) the provision on time element coverage was only applied within the framework of Virus Endorsement which listed specified causes from which a covered virus must originate; and (2) allow independent recovery in accordance with Section B.1.f. would make Virus Endorsement (which was constantly called Virus Exclusion) spotty.
Upon careful analysis of the parties' arguments, the court found that the Independence Barbershop had made a reasonable claim for relief in terms of coverage under B.1. f. of the policy and decided that the text of the policy did not limit section B.1.f. to certain contributing factors contained in Section B.1.a. 4 The Court dismissed Twin City's motion to dismiss Independence Barbershop's business interruption claims specifically relating to Section B.1.f. However, it found that Virus Endorsement contained a valid exclusion clause precluding recovery under sections other than section B.1.f
As regards the plaintiff's request to certify his class action, the court ruled that it would rule on the issue of class certification at an appropriate time but not as part of the defendant's rule 12 (b) (6) Motion to Disism.
Take Away: This order is a reminder of words in a political issue. Not all virus exceptions in a policy carried all coverage and in particular this is so in recommendations that separately provide virus coverage. Judge Nowlin, a senior federal court judge with a nonsense reputation, should be congratulated on his focus on specific policy language. And although Judge Nowlin's decision that there may be some coverage under a limited approval of virus coverage can be considered a small victory, given the number of late cases that have resulted in complete dismissal under similar circumstances and arguments, it is indeed a big one.
1 Independence Barbershop, LLC v Twin City Fire Ins. Co. No. 1-20-CV-00555 (W.D. Tex. November 4, 2020).
2 Id. at 7.
3 § B.1.f.: “The following applies only if a time element coverage applies to“ scheduled premises ”and only if the interruption of“ operations ”meets all the conditions for applicable time element coverage. (1) If the loss resulting from "" fungi "", wet or dry rotten, bacteria or viruses does not in itself require the cancellation of "" operations, but such suspension is necessary due to loss of or damage to property caused by "" fungi "", wet or dry rat, bacteria or virus, then our payment under the time element coverage is limited to the amount of loss and cost incurred during a period of no more than 30 days unless another number of days is stated in the declarations. The days do not have to be consecutive If a covered shutdown of "" operations "was caused by loss or damage other than" "fungi", wet or dry route, bacteria or viruses "" extends the "recovery period" ", we will pay for losses and expenses incurred during the delay (regardless of when such a delay occurs during "& # 39; restoration & # 39;"), but such coverage is limited to 30 days unless a different number of days is specified in the declarations. The days do not have to be consecutive.
4 “1. Limited coverage for "" Fungi "", Wet Rot, Dry Rot, Bacteria and Virus.
a. The coverage described in 1.b. below applies only when "mushrooms", wet rot or dry rot, bacteria or viruses are the result of one or more of the following causes occurring during the insurance period and only if all reasonable means were used to save and preserve property from further damage at the time before and after this happening.
(1) A "" specified cause of loss "" other than fire or lightning "
(2) Equipment for breakdown Accident occurs for equipment loss, Distribution of equipment applies to the premises concerned.
b. We pay for loss or damage by "fungi", wet rot, dry rot, bacteria and viruses. As used in this limited coverage, the term means loss or damage:
(1) Direct physical loss or direct physical damage to covered property caused by "" fungi ", wet rot, dry rot, bacteria or viruses, including the cost of removing" fungi ", wet rot, dry rot, bacteria or viruses"
(2) The cost of demolishing and replacing any part of the building or other property needed to access "& # 39; fungi & # 39; & # 39; & # 39; wet rot, dry rot, bacteria or viruses; and
(3) The cost of testing performed after removal, repair, replacement or restoration thereof damaged property is ready, predict tt that there is reason to believe that "" mushrooms ". wet rot, dry rot, bacteria or viruses are present. ” Id. kl. 4