While policyholders continue to lose most business break coverage disputes due to covid-19, it is unlikely that a clear picture of the issue will emerge before the state Supreme and Federal Courts of Appeal issue more rulings on the issue.
Insurance companies have so far largely argued successfully that the coronavirus does not lead to physical loss or damage to property – the critical issue in many cases of COVID-19 and therefore lost revenue is not covered of all risks. Federal courts in particular have ruled primarily in favor of insurers, but policyholders' attorneys say it is too early to draw any conclusions about the overall end result.
Observers estimate that out of about 20,000 cases, 90% of federal court cases have been decided in favor of the insurer, compared to 75% of state lawsuits. Experts have a number of theories that explain the difference, but there is no clear consensus as to why this has occurred.
Two recent cases have gone in opposite directions. Last week, a state court in Pennsylvania refused to dismiss a COVID-1
However, a New York judge agreed to dismiss COVID-19 related business interruption litigation filed by a Dallas-based restaurant chain against a Swiss Re Ltd. entity.
The policyholder's attorney, Micah E. Skidmore, partner with Haynes & Boone LLP in Dallas, states that policyholders have requested that several cases be filed in federal appeals courts be referred to the relevant state supreme court. He said that this "is very meaningful" because these cases are ultimately about questions of interpretation, which are legislative issues.
No state supreme court has issued judgments in the matter yet, and only one federal court of appeal, the Eighth U.S. Circuit Court of Appeals in St. Louis. Louis, has issued a decision, which was in favor of insurers.
"The trend has been overwhelming in the federal courts and almost as overwhelming in state courts that there is no coverage under traditional commercial policy for interruption claims against covid-19," says insurance lawyer Lee Siegel, a member of Hurwitz & Fine PC in Melville, New York.
But the policyholder's lawyers say it is too early to reach any conclusions. While federal rulings so far have been disappointing for policyholders, it is "by no means the end of the line" because state laws, policy language and facts differ, says Cary B. Lerman, policyholder attorney at Munger, Tolles & Olson LLP in Los Angeles.
For example, some policies have virus exclusions, while others do not, and some explicitly provide coverage for those suspended by the government, he said.
The policyholder's attorney, Paul Walker-Bright, an attorney with the Neal, Gerber & Eisenberg LLP in Chicago, said that many decisions so far have been based on virus-exempt policies, so "the numbers look a little skewed because of that."
If federal appeals decisions "follow the pattern seen in the state level of litigation", which has recently been to the benefit of policyholders, "we should start seeing a shift here" because the federal courts "will not be able to ignore" the judgments, he said.
"I do not know how it will go," said policy holder attorney Scott D. Greenspan, senior attorney with Pillsbury Winthrop Shaw Pittman LLP in New York. "It will certainly be up to the state supreme courts." [19659002"Idonotthinktherewillbeafloodonewayoranotherwheneverythingshakes"saysLermanofMungerTolles&Olsonsaid"WhenyoumixandmatchthedifferentpermutationsaswellasthedifferentapproachesusedindifferentstatesIthinkwewillseedifferentresults"withpolicyholderswinningsomeandlosingothers"Monewillalldependon"thepolicylanguagethefactsofthecaseandthelegislation"hesaid
Tyrone R. Childress, head of insurance recovery with Jones Day LLP in Los Angeles, said, "There are new cases filed daily and courts of law will do what the courts will do," but until federal district or state appeals courts provides more guidance, "everyone will still wonder where the goals are going."
Insurance Agent Larry D. Mason, a partner with Goldberg Segalla LLP in Chicago, said that overall, insurance companies will win. "We see more and more firm law arises for which judges are more likely to find solace in what is becoming the majority trend "of insurance decisions, he says., said Mason.
The policyholder's attorney Scott Godes, a partner with Barnes & Thornburg LLP in Washington, said however, that in recent decades, "hotly contested" asbestos and environmental law cases have initially gone the way of insurers, in whole or in part before the trend shifted towards policyholders.