Courts throughout the nation have cut up on the important thing COVID-19 protection query of whether or not a policyholder’s incapability to totally function its enterprise brought on by COVID-19 restrictions would fulfill the coverage’s enterprise interruption protection requirement that the “loss” needed to be a outcome from a “suspension of operations” brought on by “direct bodily lack of or harm to coated property.”
On Monday, February 22, 2021, an Illinois federal choose in a well-reasoned Memorandum Opinion and Order in COVID-19 multi-district litigation answered that key COVID-19 protection query affirmatively, ruling that eating places, bars, theaters, and different hospitality institutions partially working had suffered a “bodily loss” brought on by COVID-19 restrictions and have been entitled to enterprise interruption protection. With this ruling in, In re: Society Ins. Co., COVID-19 Bus. Interruption Safety Ins. Litig., No. 20 C 02005, 2021 WL 679109 (N.D. Ailing. Feb. 22, 2021), (“Opinion and Order”), the policyholders might pursue the wrongful denial of COVID-19 enterprise interruption losses towards their insurer Society Insurance coverage Firm (“Society”).
The go well with birthing this essential Opinion and Order originated from the MDL Litigation Panel’s alternative of three (3) bellwether instances—all eating places—from the roughly 40 Society MDL instances. In these instances, Society summarily denied business-interruption protection claims and as soon as policyholders filed go well with, Society filed motions to dismiss and abstract judgment motions.
The In re: Society Opinion and Order frames the MDL points as follows:
The court docket denied Society’s motions to dismiss and abstract judgment motions as to claims for enterprise interruption protection in addition to unhealthy religion claims introduced below the Illinois Insurance coverage Code. The court docket granted abstract judgment to Civil Authority and Contamination coverage provisions and, to one of many three bellwether instances, denied protection below the coverage’s Sue and Labor clause. See In re: Society, 2021 WL 679109, at *1.
The enterprise interruption clause within the Society insurance policies acknowledged:
The coverage additional defines a “Coated Explanation for Loss” as a “Direct Bodily Loss except the loss is excluded or restricted below this protection type.” Society’s insurance policies didn’t comprise a virus exclusion.
Society argued that there was no protection below the above coverage clause as a result of the phrase “direct bodily lack of or harm to coated property” required an precise alteration or change to bodily property and that the “losses” in eating places weren’t “bodily” as a result of:
In response to this argument, the court docket wrote, “[b]ut an affordable jury can discover that the Plaintiffs did endure a direct ‘bodily’ lack of property on their premises.” The court docket defined a number of causes for this conclusion. First, the COVID-19 pandemic induced shutdown orders requiring social distancing, which, in flip, imposed a “bodily” restrict on using your complete premises and the variety of individuals that might inhabit the premises on the identical time. If the restaurant might develop its bodily area, the court docket wrote, then the restaurant might then serve extra friends and the “loss” would a minimum of, partly, be mitigated. The court docket concluded that on this scenario, “the loss is ‘bodily’—or on the very least, an affordable jury could make that discovering.” (Emphasis within the unique.)
Second, in dismissing Society’s argument, the court docket utilized common rules of contract building for the phrase “direct bodily lack of or harm to coated property” and interpreted the coverage’s disjunctive language of “or” to imply that the phrase “bodily loss” was completely different from the phrase “bodily harm.” Id. at *8. The court docket discovered:
