TORT AND INSURANCE LAW
BY BRITTANY K.T. KAUFFMAN AND BROOKE H. MEYER
This article builds on two previous Colorado Lawyer articles surveying COVID-19 insurance issues. It highlights recently developed initial discovery protocols for business interruption insurance disputes that are intended to make discovery in these cases more efficient.
months into the pandemic, COVID-19 continues to impact large
and small businesses. Many businesses have permanently
closed, while others have adapted by transitioning employees
to teleworking, developing a virtual retail presence, or
seeking federal loan assistance. The aggregate losses for
U.S. companies with fewer than 100 workers has been estimated
at as much as $431 billion a month.
Recognizing the need to efficiently process this influx of cases in both state and federal courts, IAALS, the Institute for the Advancement of the American Legal System at the University of Denver, launched a project to create discovery protocols for BI insurance disputes (BI Insurance Protocols). The BI Insurance Protocols provide a new pretrial procedure for cases involving BI insurance for commercial property damage claims arising from the COVID-19 pandemic, with the goal of reducing conflict and cost for the parties and the court. The protocols are designed to be implemented by trial judges, lawyers, and litigants in state and federal courts.
The Current State of Business Interruption Litigation
coverage, also known as business income coverage, covers lost
income and operating expenses when a business cannot continue
normal business operations. The business interruption must
result from direct physical loss or damage to the
insured's property. Coverage depends on the policy
language, insurers' forms, and any exclusions that would
preclude coverage for BI losses. The threshold question when
determining coverage is whether the business suffered a
direct physical loss of or damage to its property according
to the policy terms at issue.
Covid Coverage Litigation Tracker
Tom Baker at the University of Pennsylvania Carey Law School
developed the online Covid Coverage Litigation Tracker to
report data on BI insurance coverage cases related to the
Spectrum of Recent Court Rulings
BI lawsuits across federal and state courts are in early litigation stages. Courts are beginning to rule on defendants' motions to dismiss for failure to state a claim, plaintiffs are seeking to amend complaints, and parties are exchanging initial disclosures. Court rulings on defendants' motions to dismiss for failure to state a claim run the gamut, including dismissing plaintiffs' cases with or without prejudice, denying the motions and proceeding with scheduling orders and setting trial dates, or granting dispositive motions in plaintiffs' favor.
Studio 417, Inc. v. Cincinnati Insurance Co., the
Western District of Missouri denied an insurer's motion
to dismiss, rejecting arguments that plaintiffs, a proposed
class of restaurants and hair salons, did not state plausible
claims for "direct physical loss," "civil
authority," "ingress/ egress," "dependent
property," and "sue and labor" coverage under
their "all risk" policies.
North State Deli, LLC, v. Cincinnati Insurance Co.,
a superior court in North Carolina granted plaintiffs'
partial motion for summary judgment against defendants
"jointly and severally" for declaratory judgment,
where the policies did not contain viral exclusions and the
court concluded that the policy language,
'"accidental physical loss or accidental
physical damage,'" has "two distinct and
separate meanings," and "the phrase 'direct
physical loss' included the loss of use or access to
covered property even where that property has not been
have also dismissed insureds' lawsuits—both with
and without prejudice—for failure to adequately allege
direct physical loss. In Henry's Louisiana Grill,
Inc. v. Allied Insurance Co., the Northern District of
Georgia granted the insurer's motion to dismiss with
prejudice the insureds' lawsuit seeking coverage for BI
and civil authority clause coverage.