Two Key Decisions Regarding COVID-19 Related Business Losses

Law360 reports that more than five thousand civil lawsuits have been filed by businesses seeking to recoup pandemic-related losses under their commercial policies.

This new wave of litigation has called upon courts across the country to determine whether commercial policyholders have a right to recover for business losses in light of the COVID-19 pandemic.

Just last month, two federal courts reached conflicting decisions in similar suits brought by commercial policyholders against their insurers. The rulings, issued one day apart, highlight the challenges litigants will face in pursuing lawsuits of this nature on either side of the docket.

In Studio 417, Inc., et al. v. The Cincinnati Ins. Comp., the plaintiff-insureds brought a class action against their insurer after their claims for pandemic-related business losses were denied. The respective policies each contained the same relevant language, which obligated the insurer to cover “direct ‘loss’ unless the ‘loss’ [was] excluded or limited”.

A “Covered Cause of Loss” was defined as “accidental [direct] physical loss or accidental [direct] physical damage”. However, the policies were silent as to what constituted a “physical loss” or “physical damage”.