Thousands of businesses nationwide required to close their doors due to COVID-19 and the government mandates that followed have filed ‘business interruption claims’ with their insurance carriers and the denials from insurance companies are mounting. In the first decision of its kind, a judge in Michigan recently sided with the insurance carrier and affirmed the carrier’s denial of the insured’s business interruption claim. While this is but one decision in one jurisdiction, business owners and attorneys alike are scrutinizing that decision closely, looking for signals of what may lie ahead. As the first court ruling to address a COVID-19-related business interruption insurance claim, it certainly raises questions for North Carolina insureds looking for the same relief.
In the Michigan case, the insured business owner filed suit against his insurance carrier after the carrier denied his business interruption claim through its internal claim procedures. The insured unsuccessfully argued to the court that the policy language providing coverage for business interruption should extend to cover the COVID-19 business interruption he had experienced. The court sided with the insurance company and dismissed the insured’s claim, holding that the plain language of the policy made clear that business interruption coverage would only lie for direct physical loss of or damage to the insured’s property. The Michigan court rejected the insured’s argument that non-destructive losses, including loss of use of the property due to government shutdown mandates, triggered coverage under the policy. In short, the court found there was not a valid claim for coverage absent some type of physical destruction to the business property.
In light of the Michigan judge’s decision, two questions immediately come to the forefront for other businesses that may be seeking assistance from their commercial insurance carrier.
First, is the language in your policy the same as that in the Michigan policy? Or different? The Michigan judge’s decision highlights that policy language in the insuring document likely will be key in evaluating whether coverage lies for insureds under their business interruption policies. Courts will look at each policy’s basic “insuring” language and its exclusions from coverage. In short, each coverage determination will more than likely be policy specific.
Second, what facts do you have that may be more favorable than the Michigan insured? Each claim decision will be policy-specific and fact-specific. Certain facts could persuade a judge to view your claim differently than the Michigan judge given the extraordinary nature of COVID-19. There may be room for creative advocacy by lawyers to present favorable arguments for insureds.
If you have business interruption coverage and have questions about whether your policy provides coverage for COVID-19-related losses, or would like expert guidance throughout the claims and coverage process, including legal advocacy if needed, Manning Fulton’s experienced insurance law team stands ready to assist. Please contact Jessica Vickers or your Manning Fulton relationship attorney for assistance.