In a policyholder victory, a federal district court found that COVID-19 can cause physical loss under business interruption policies. In Studio 417, Inc., et al. v. Cincinnati Insurance Co. No. 20-cv-03127-SRB (WD Mo. 12 August 2020), the court rejected the argument often made by insurance companies that "all risks" real estate insurance requires a physical, structural change to trigger coverage. This decision shows that, with the correct application of policy interpretation principles and the strategic use of submissions and evidence, policyholders can defeat the insurance industry's 'party-line' argument that insurance cancellation insurance can in no way apply to pay for the unprecedented losses. as a company has COVID-1
The policyholders in Studio 417 run hairdressing salons and restaurants that claim allegations of interruption in the company. In a lawsuit to ensure their coverage, policyholders claim that in recent months it is likely that customers, employees and / or other visitors to the insured properties were infected with COVID-19 and thus infected the insured properties with the virus. Their complaint claims that the presence of COVID-19 "makes physical property in their vicinity unsafe and unusable." Unlike some other complaints seeking to enforce such coverage, it also claims that the presence of COVID-19 and the government's' closure order '' caused direct physical loss or direct physical damage "on their premises" by denying use and damaging the covered property. and by causing a necessary interruption of operations during a restoration period. "
The Court concluded after" an examination of the record "that the complainants had" adequately stated a claim for direct physical loss "and thus denied the insurer's proposal for termination. The Court pointed to the plaintiffs' allegations of a "causal link between COVID-19 and their alleged losses" and allegations that COVID-19 "is a physical substance" allegedly attached to the plaintiff's property, making it unsafe and unusable and thus resulting in direct physical The court points to Missouri cases which claim that “a loss can occur when the property is uninhabitable and unusable. for its intended purpose. "
Studio 417 decision stands in stark contrast to previous decisions regarding COVID-19 claims, in particular, the court expressly refused to follow the recently decided COVID-19 that the insurance companies trumped in Social Life Magazine, Inc. v. Sentinel Insurance Co., No. 1: 20-cv-03311-VEC (SDNY 2020). While the defendant, Cincinnati Insurance Co., claimed that " Social Life famously claims that the virus harms lungs, not printing presses ", Studio 417 the court quickly dismissed this position, arguing instead that policyholders were likely to claim malignant COVID-19 particles attached to and damaged their property, rendering their premises unsafe and unusable. Suite 417 also differs specifically from two previous apparent insurer decisions, Gavrilides Mgmt. Co. v Michigan Insurance Co. No. 20-258-CB-C30 (Mich. Co. Ct. 1 July 2020) and Rose & # 39; s 1 LLC, et al. v. Erie Insurance Exchange No. 2020-CA-002424-B (DC Super. Ct. 6 August 2020) (as we have previously discussed here), where the litigants considered that COVID-19 does not constitute physical loss or damage. The courts of Gavrilides and Rose stated that both the plaintiffs there, unlike those in Studio 417 did not claim or prove that COVID-19 was present at or had physically harmed their characteristics.
Studio 417 decision points out that when seeking such coverage, it is the key for policyholders to tie parts of the coverage to facts about the damage and loss, allegations that a court may use to deny cautious arguments of insurance companies that in any way business interruptions can not be triggered. The early decisions, both Studio 417 supporting the coverage and those who have so far rejected it, all show that careful analysis of policy language, coupled with an analysis of facts and evidence of the loss in question, will help courts recognize that coverage should apply.