A German court in California on Tuesday ruled out virus exclusion in a property policy that blocks coverage for coronavirus-related business interruptions and is described as "nonsense" by the policyholder's argument that civilian coverage should kick in regardless of exceptions. ] The ruling complements the number of insurers' decisions in COVID-19 business interruption cases, although policyholders have also had some court victories in disputes filed in courts across the country.
Dom Franklin EWC Inc. et. al. v. The Hartford Financial Services Group Inc. U.S. Pat. Magistrate Judge Jacqueline Scott Corley of the Northern District of California noted that the business owner policy for Fresno, California-based wax salon Franklin EWC Inc. included an exemption for virus-related losses.
The salon, which had about 30 employees, was closed during shutdowns imposed by the government in March to limit the spread of COVID-1
In a lawsuit that sought to compel the insurer to pay the claim, Franklin EWC claimed that the coronavirus caused "direct physical harm and loss" that triggers coverage under the policy.
The exclusion of viruses in the policy, however, blocks coverage for damage caused by the "presence, growth, spread, spread or any activity of" fungi ", wet rot, dry rot, bacteria or viruses," the decision states.
The exception applies to the loss of business interruption, the court ruled.
“The complaint repeatedly alleges that the virus caused and continues to cause the risk of direct physical loss required for a covered cause of loss. Because the loss was caused directly or indirectly by the virus, the virus exclusion is applied in its simple and unambiguous language, the decision says.
The policyholder claimed that the salon is liable for coverage in accordance with the civil authority's provision in the policy. , which covers losses when access to property is blocked by the government order, despite virus exclusion, courts say.
“Thus, according to the plaintiff's theory, the loss is created by the closure orders rather than by the virus, and therefore Virus exclusion does not apply. Nonsense, ”appears from the decision.
The provision in the civil authority in the policy applies when access is prohibited as a direct result of a covered loss, the decision says.
A lawyer for the Franklin EWC could not be immediately reached for comment.
Hundreds of companies have sued their insurance companies for pandemic-related business interruptions, and Tuesday's decision is one of about a dozen early decisions that have benefited insurance companies, but most of the other decisions have focused on whether policyholders suffered a "direct physical loss. "for their properties.
In at least three of the COVID-19 cases, courts have ruled in favor of policyholders.
More insurance and risk management news about the coronavirus crisis here .