When the United States' fight against COVID-19 rages, the fight in the (albeit virtual ) courts begins to gain momentum. Courts across the country are faced with the ultimate question: whether the widespread presence of the COVID-19 virus and the resulting state closure decisions constitute an unintentional loss that causes direct physical loss to the property of insured property owners.
Most, if not all, of these business owners have paid substantial premiums in exchange for insurances that are considered "all-risk" insurances. 1 According to applicable business interruption and extra expense protection, these complainants rightly claim that their all-risk policy covers business losses caused by "direct physical loss of" the commercial property ( ie the occurrence and effects of COVID-1
Apart from business interruptions and extra cost recovery, other complainants claim that their damages are covered by the civil authority's coverage provision in their policy. A "civil authority" provision is an insurance provision that describes how the loss of business income coverage applies when a state entity denies access to the insured property. 2
The presence of COVID-19 caused authorities across the country to issue orders requiring the closure of operations at a large number of facilities. As a result of these closure decisions, many insured business owners suffered drastic business losses. Ordinary property insurance for companies (and also homeowners) describes the situations in general and the clause itself will indicate whether the insurer will pay for corporate income losses if a civil authority prevents the policyholder from accessing the premises covered by the insurance. 3
An example of a policy form that provides civil authority coverage looks like this:
When a covered cause of loss causes damage to property other than property in the described premises, we pay for actual loss of business income you maintain and necessary additional costs caused by action of the civil authority prohibiting access to the described premises
its associated closing orders will have to fight in a battle over how to interpret that type of provision. An example of a potential ambiguity in the above-mentioned provision is what it means for a civil authority to "prohibit access to the premises described."
The definition of Webster & # 39 ;s Dictionary of "Prohibit" states: "1: to prohibit by authority: ENJOY 2a: to prevent doing something b: EXPLAIN. " 4
But how should a policyholder know what 'prohibit' means if it is left undefined in the policy? A policyholder who takes into account the dictionary definition of "prohibit" can reasonably interpret the insurance language "prohibit" to mean "prevent" access to the property.
Would a reasonable policyholder interpret "prohibit access" to imply a temporary restriction of access? Would a COVID-19 closure order restricting "non-essential" customers from accessing and / or occupying the premises constitute a "prohibition" required for coverage under the policy?
In the end, the facts at hand will be verifying. If the commercial policyholder is a restaurant that could continue to operate through pickup and delivery during the COVID-19 pandemic, it may be more difficult to argue that access to the insured property was "prohibited" compared to another company that may have closed completely. of or whose type of activity was not so easy to adapt to these rapidly changing societal conditions.
Without defining what it means for the civil authority to "prohibit access" to a property, policyholders will no doubt continue to raise arguments based on reasonable interpretations of what their coverage means. And if it is established that there is in fact more than a reasonable interpretation of what it means to "prohibit access" to an insured premises, there is an ambiguity, and it should be interpreted against the establishment of the insurance. 5  _______________________________________________
1 "All-risk" policies cover all losses covered unless otherwise expressly excluded by the insurer in the contract.
2 https://www.investopedia.com/ Terms / c / civil-authority-clause.asp
5  Pacific Employers Ins. Co. v. Wausau Buss. Ins. Co. 2007 WL 2900452, at * 4 (M.D. Fla. 2 October 2007).