Hunton Insurance Attorneys Syed Ahmad, Geoffrey Fehling, and Kevin Small commented on a dealer's insurance dispute related to COVID-19 in the latest issue of Recall Roundup, published on the Hunton Retail Law Resource Blog.
In a setback for retail policyholders hoping to enforce coverage for losses due to COVID-19 in federal court, a Tennessee district court recently dismissed a complaint filed by a Nashville-based facility seeking coverage during a food contamination in its property policy. Judgment of the Court dismissing Nashville Underground LLC v. AMCO Insurance Co. is remarkable because of the great efforts that have been made to define a policy provision ̵
Nashville Underground LLC – "Nationally acclaimed, seven-story restaurant, bar, nightclub and live music venue" in downtown Nashville – procured a commercial property policy from the AMCO Insurance Company to protect it from unintentional catastrophic events. Given the increased risk of its business as a food pollution disruption, Nashville Underground purchased special coverage for business interruptions due to "Food Pollution." Specifically, the policy would provide corporate income coverage if the Nashville Underground was shut down by a government agency as a result of the "discovery or suspicion" of "an outbreak of food-related illness in one or more persons derived from… [f] ood that has been contaminated. of viruses … was transmitted by one or more of [its] employees. "
In March 2020, COVID-19 spread unpleasantly across the country. In an attempt to stop the spread, local authorities issued broadly worded orders urging the public to stay According to the orders issued in Nashville, the Nashville Union had to close and cut off all its revenue.When the Nashville Underground sought coverage under its policy, the AMCO denied the claim.
Nashville Underground sought to enforce it. coverage they paid for by suing in the Tennessee state court, and AMCO dismissed the case in federal court. Despite Nashville Underground's allegations that the government's order for closure was issued in part due to suspicions that COVID-19 was spread through food contamination and that its employees were exposed to COVID-19 as potentially contaminated food served on Nashville Underground, and despite applicable standards for notice applicable to federal courts, the court dismissed the complaint.
The crux of the Court's decision was that the provision on food contamination was triggered "only if there is a suspicion that one or more persons have actually become ill," as opposed to a suspicion that a food-related disease may occur in the future, as the relevant wording is written in the “past or present perfect time. "According to the Court, coverage under the Food Pollution Regulation applies only in the limited circumstances where a company is suspended by the government because of suspicions of an outbreak of food-related illness following confirmed cases of individuals becoming ill due to food contaminated by employees. In other words, the prophylactic closure of a restaurant under mandatory government regulations aimed at preventing an outbreak of suspected food-related illness transmitted by food handlers is not covered.
However, the Court's narrow interpretation is difficult to reconcile with what the average policyholder would expect when providing cover for business interruptions due to food contamination, regardless of the "tension" used in the language. In fact, it is difficult to imagine a restaurant owner perceiving any meaningful difference between a government system that shuts down a business because of suspicions that contaminated food can make people sick and a suspicion that contaminated food has already become ill. For the restaurant owner, it's the same thing – his or her business has to be shut down due to "suspicion" of food contamination. And therefore the insurer was obliged to clearly say that the coverage only applied if people became ill first, which it clearly did not.
The case Nashville Underground certainly raises a unique question among the many COVID-19 related trials awaiting across the country. Unfortunately, this is in line with the same strained interpretations of policy language adopted by some federal courts to limit broad coverage of the COVID-19 pandemic.