In the multibillion-dollar fight over insurance coverage for pandemic-related business losses, a Florida gynecologist succeeded where more than a dozen professional baseball teams and an iconic Hollywood restaurant failed.
Since Covid-19 sparked government-ordered shutdowns in March, judges have dismissed more than four times as many business-interruption lawsuits as they’ve allowed to proceed, according to a preliminary analysis by the
Christopher Walker, an Orlando doctor, is one of them. Though his policy -- like many -- contained a provision that
“This insurance is make-or-break for a lot of businesses,” Imran Malik, Walker’s attorney, said in an interview. “People like my client paid for coverage for these kinds of losses and it isn’t right that insurers don’t want to pay.”
The stakes are high for thousands of businesses. The outbreak has led to a surge in U.S. bankruptcies, including rental-car company Hertz Global Holdings Inc. Century 21 Stores said it couldn’t survive after its insurer denied its business-interruption claim.
But the pandemic is also squeezing insurers. In the second quarter -- after the initial shutdowns --
Industry executives say pandemic-related losses may be their biggest ever, and business-interruption claims will likely be part of that, even though many insurers added virus waivers to policies over the past decade following the SARS outbreak in 2003.
Most of the cases tossed out so far had virus-exclusion clauses. When policies don’t have the exclusion, insurers are arguing Covid-19 can’t cause the physical damage or loss required for a business-interruption payout, like from a tornado or flood. And the industry is winning dismissals with that argument, according to the
“Business-insurance policies are meant to cover physical things,” said
A September win by
Other businesses have also struck out in trying to persuade judges to allow their claims to go to trial over policies that had virus exclusions.
A federal judge in Arizona ruled Nov. 13 the Chattanooga Lookouts -- a Class AA minor-league affiliate of Major League Baseball’s Cincinnati Reds -- and more than a dozen other teams couldn’t overcome the exclusions. And the historic status of Musso & Frank Grill in Los Angeles -- founded in 1919 and once the haunt of Hollywood stars such as
Emails to a co-owner of the Lookouts and lawyers for the restaurant weren’t returned.
But not all policy holders are being thwarted. In August, a Missouri federal judge ruled jurors should be able to decide if
In response, Cincinnati Financial officials said in an email that the “court should ultimately enforce the language of our policy contract. Our commercial property insurance policies require direct physical damage or loss to property and do not provide coverage in this case.”
Tom Baker, the Penn law professor tracking more than 1,300 business-interruption cases, said the case of the Orlando gynecologist may signal a potential strategy for other claims by attacking the ambiguity of language in the exclusion.
In that case, U.S. District Judge
Leon Davis, a spokesman for
Other lawyers are targeting state lock-down orders as a way around problems showing the virus physically damaged their clients’ businesses.
“It’s going to be easier to win the governmental-order cases” because there isn’t the hurdle of proving physical loss, said Los Angeles lawyer
Despite the setbacks, businesses keep suing. This month, the owners of the independent Washington Wild Things minor-league baseball team sued
“We are fighting this on all fronts,” said Mark Lanier, whose clients include the National Basketball Association’s
To contact the editors responsible for this story:
Steve Stroth, Peter Blumberg
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