LI Business Interruption Coalition

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Creedon & Gill P.C. is investigating and accepting clients for Covid-19 related Business Interruption claims. There are strong legislative and legal forces at work against Insurers who are issuing blanket denials on these kinds of claims. Class Action lawsuits have already been filed, and more are in the works.  Participation in these suits NOW may be the best way to be at the table when a resolution is reached.  Follow and join the Long Island Business Interruption Coalition Facebook group for up to the minute  information.


​Update: Business Interruption Insurance in the Time of COVID-19

On March 23, 2020, shortly after the Governors of California, New York, Connecticut and New Jersey issued orders closing non-essential businesses, we recommended that businesses review their insurance policies to determine if they had either business interruption coverage or civil authority coverage that might be available to lessen the economic blow of COVID-19.  As explained here, business interruption coverage generally allows a business to recover certain losses in the event that the business suffers physical damage or loss that prevents it from operating its business, whereas civil authority coverage, generally allows a business to recover losses when it a civil authority issues an order that closes a business or prevents it from normal operations.  We also recommended that businesses submit any claims expeditiously because virtually all policies require policy holders to submit claims “promptly,” and the failure to do so provides a basis to deny a claim.

Since our initial article, many insurers have taken the position that claims related to COVID-19 are not covered, either because there has been no physical damage to the property or because the policy expressly excluded coverage for viral contamination.  In turn, as reported herehere, and here some members of Congress have asked insurers to cover COVID-19 losses under business interruption policies.  And, as reported here and here, some state legislators, including lawmakers in New Jersey, New York, Ohio, Louisiana and Pennsylvania, have proposed legislation that would require insurers to provide some coverage for losses stemming from COVID-19.  The Congressional requests and the proposed legislation has met resistance from insurers, that have argued that forcing them to cover such claims, could lead them to insolvency.  Indeed, the National Association of Insurance Commissioners, (“NAIC”), which is comprised of the insurance regulators of the 50 states and the District of Columbia, has urged Congress not to take action that would require insurers to cover COVID-19 business interruption claims where the policy excludes coverage for communicable diseases.  Further, any legislation that purports to expand the coverage obligations of any insurance policy would likely be challenged as unconstitutional under the Contracts Clause of the U.S. Constitution, which, with some exceptions, generally prohibits states from enacting legislation that impairs contractual obligations.

Thus, business owners should not await (or count on) legislation to decide their course of action. Rather, they should review their insurance policies to see if they may already have coverage for losses stemming from COVID-19.  Businesses, particularly those in the restaurant, hospitality and event industries, should review their policies to determine what coverage may be available.  As explained here, some policies sold to businesses operating in the restaurant and hospitality industry, may expressly address losses caused by viruses.  Moreover, some businesses may have event cancellation coverage available to them.  As explained here, the organizers of the Wimbledon Championship, expect to receive a large insurance payment because COVID-19 resulted in the cancellation of the tennis tournament.


Several businesses have already filed lawsuits seeking declarations that they are entitled to recover businesses losses resulting from the COVID-19 pandemic.  These lawsuits generally allege that a civil authority, either a county or state official, ordered the business to cease normal operations to contain the spread of COVID-19 and that potential COVID-19 contamination constitutes physical damage or loss, which is either expressly covered by the policy or is not expressly excluded by the policy. At one end of the spectrum, are lawsuits which allege that the business has a policy that expressly covers losses associated with COVID-19.   For example, two California restaurants filed a complaint that asserts a claim for civil authority coverage and alleges that the insurance policy “specifically extends coverage to direct physical loss or damage caused by a virus.”  Similarly, a complaint filed in Southern District of Texas seeks coverage under a ‘Pandemic Event Endorsement,’ which expressly covered, among other diseases, “Severe Acute Respiratory Syndrome-associated Coronavirus (SARs-CoV) disease” and its mutations and variants, but alleges that the insurer denied coverage because it concluded that COVID-19 is not a mutation or variant of SARs-CoV disease.  At the other end of the spectrum, is a lawsuit filed by restaurants and movie theaters in the Northern District of Illinois, which alleges that the businesses are entitled to insurance coverage because the Illinois Governor ordered their businesses to close and their insurance policies do not expressly exclude losses “caused by a virus.”  The Northern District of Illinois suit alleges that if the insurer wished to exclude pandemic-related losses, it could have done so, as many insurers have.


Insurance policies are contracts and thus, are interpreted as such.  Accordingly, a business whose policy expressly covers viral contamination or a pandemic is more likely to succeed on a claim for coverage than a business whose policy expressly excludes coverage for viruses.  Given the variances in policy language, whether a particular policy will provide coverage will depend upon the actual language of the policy and the specific circumstances giving rise to the claim.  Businesses should therefore review their policies to determine their rights.


2020 Epstein Becker & Green, P.C. All rights reserved.




The business interruption litigation landscape continues to heat up in the midst of COVID-19, with big names like Chef Thomas Keller jumping in to sue his insurer over coronavirus business interruption claims and other businesses following suit.


In a recent development, two motions were filed on April 20 with the Judicial Panel on Multi district Litigation (JPML) that asked the panel to consolidate federal suits accusing insurers of dodging claims by businesses that were shut down by government orders, according to Reuters. Motions for JPML consolidation are typically a way for plaintiffs’ firms to name themselves as the leaders of developing litigation, added Reuters’ Alison Frankel.


The first of these motions involves Levin Sedran & Berman and Golomb & Honik, and argues that the question of whether business interruption insurance policies will cover losses incurred by these businesses can’t be answered in piecemeal by different courts around the US because of its significant national importance. The second bid, which was filed by DiCello Levitt Gutzler, the Lanier Law Firm, Burns Bowen Bair and Daniels & Tredennick, underscored the efficiency of centralized expert epidemiology discovery and legal analysis.

The key issues across the complaints filed against insurers so far are whether COVID-19 causes physical damage or property loss, and whether insurance coverage is triggered when the virus is present on or near a policyholder’s property, as argued in the brief.

However, Frankel noted in the Reuters report that it’s not definitive that the cases will be consolidated. Law professors Alexandra Lahav of the University of Connecticut and Elizabeth Burch of the University of Georgia told the reporter that the JPML has become reluctant to create new multidistrict litigation (MDL). Lawsuits involving contract disputes, which includes insurance policies, only have a 40% chance of consolidation, said Burch.


Read more: Travelers fires back against law firm suing for business interruption cover


Meanwhile, Daniel Schwarcz, a University of Minnesota law professor who specializes in insurance law and regulation, said that the plaintiffs’ firms are correct that some “important legal and factual issues” span policyholders’ claims. For example, if businesses were ordered shut because of the physical presence of the virus, this could be covered by business interruption insurance, but if they were ordered shut because of the risk of the virus spreading, this would likely not be covered.

However, insurance law questions are matters of state law, according to Schwarcz, and each state has their own precedent on how they define physical loss or damages. Similarly, language on business interruption insurance is varied across policies and so is the language around shutdown orders issued by state governors.

“It is difficult to see how a consolidated action would deal with these variations,” Schwarcz told Reuters. “There are immense complications … that may ultimately prove insurmountable.”


At the same time, some plaintiffs’ lawyers are resisting consolidation. John Houghtaling of Gauthier Murphy & Houghtaling filed the first business interruption suit around the coronavirus shutdown and is working with Thomas Keller and other celebrity chefs to advocate for restaurants demanding cover from insurers. These cases are not removable to federal court and would thus not be part of an MDL in federal court. The lawyer is also opposed to consolidation, calling it “inefficient and inappropriate.”

Read more: Six insurers face federal class action lawsuits for denying business interruption claims

Insurance defense lawyer James Martin of Zelle added that a business interruption coverage MDL might make sense down the road, but the recent requests seem premature since less than two dozen business interruption suits have been filed in federal court.


“With that limited subset, how can the JPML identify the common questions of fact to fashion an order that will identify which of the hundreds or thousands of later-filed cases will get transferred for coordinated or consolidated pretrial proceedings?” said Martin. “Should the MDL include class actions (which we think are particularly ill-suited for business interruption claims)?  Should the MDL be limited to certain types of policies or particular questions?”

But plaintiffs’ lawyer Levin said consolidation in an MDL would ensure consistency across what he expects to be significant litigation.


“It’s a managerial tool,” he said to Reuters. “The courts are going to have to look at it and say, ‘What do we want? Do we want this litigated in every jurisdiction? In every division of every jurisdiction?’”

The DiCello Levitt group’s brief argued that a business interruption insurance MDL could address important questions about property insurance, COVID-19, and government-ordered shutdowns, stating that “the same type of evidence will be needed in every case to consider and ultimately to determine whether COVID-19 caused or constituted ‘physical damage or loss to property.’”


Insurers Reject House Members’ Request to Cover Uninsured COVID Business Losses


A bipartisan group of U.S. House members has asked insurers to retroactively recognize financial losses relating to COVID-19 under commercial business interruption coverage for policyholders.

Eighteen House members made their case in a March 18 letter addressed to the leaders of the American Property Casualty Insurance Association, the National Association of Mutual Insurance Companies, the Independent Insurance Agents & Brokers of America, and the Council of Insurance Agents and Brokers.

In response, the four industry groups said they’re working to provide relief to policyholders but not through the coverage in question.

“During times of crisis, we must all work together,” the letter from the congressional representatives states. “We urge you to work with your member companies and brokers to recognize financial loss due to COVID-19 as part of policyholders’ business interruption coverage.”

Those signing the letters include the following House Democrats: Nydia Velazquez, N.Y.; Andy Kim, N.J. (who is self-quarantined due to contact with someone positive); Grace Napolitano, Calif.; Marc Veasey, Texas; Alcee Hastings, Fla.; Rashida Tlaib, Mich.; Gilbert Cisneros, Calif.; Scott Peters, Calif.; Max Rose, N.Y.; Kathleen Rice, N.Y.; Joe Cunningham, S.C.; and Andy Levin, Mich.

The following Republican House members also signed the letter: Brian Fitzpatrick, Pa.; Jim Hagedorn, Minn.; French Hill, Ark.; Rick Crawford, Ark.; Steve Womack, Ark; and Bruce Westerman, Ark.

The letter argues that American businesses are “understandably concerned about the potential financial impact the continued global spread of COVID-19 may have on their operations” in the wake of more than 118,000 declared cases of the disease in 114 countries globally, with more than 4,000 people having lost their lives so far. As a result, they argue that including COVID-19 related losses in business interruption coverage is key.

“In many commercial property insurance policies, business interruption coverage is triggered when the policyholder sustains ‘direct physical loss of or damage to’ insured property,” the letter notes. “In addition, many commercial property insurance policies provide coverage for business income losses sustained when a civil authority prohibits or impairs access to the policyholder’s premises.”


The members of Congress argue that shelter-in-place orders alone relating to the COVID-19 crisis, such as the one in place for the greater San Francisco Bay Area since March 16 and another under consideration for New York City, should be among the situations counted under that policy language. California now has issued a “stay at home” order statewide.

“These ‘shelter-in-place’ orders and curfews—combined with those individuals who have already chosen to stay in their home over fear of contracting the virus—will no doubt have an economic impact on America’s businesses, particularly its small businesses,” the letter argues. “Many of us have already been hearing from constituent businesses who have been forced to send employees home or shutter their doors due to a loss of economic activity.”

David Sampson, president and chief executive officer of the APCIA, Charles Chamness, president and CEO of NAMIC, Bob Rusbuldt, president and CEO of IIABA and Ken Crerar, president and CEO of CIAB, sent a joint letter to Rep. Velazquez, D-NY, the first signatory and chair of the House Committee on Small Business, in response.

“Standard commercial insurance policies offer coverage and protection against a wide range of risks and threats and are vetted and approved by state regulators. Business interruption policies do not, and were not designed to, provide coverage against communicable diseases such as COVID-19,” they wrote.

“The U.S. insurance industry remains committed to our consumers and will ensure that prompt payments are made in instances where coverage exists,” they added.

In their response, the trade group leaders noted that member insurers have been active in charitable efforts in their communities and have begun working with customers to offer flexibility on premium payments.

“We recognize the extraordinary challenges our country is facing—our member businesses, our employees, and our families are confronting the same trials,” the trade group letter said, concluding, however, that government action is needed to address growing problems.

“The U.S. is in the midst of a national crisis that will require federal assistance that provides funding directly to those American individuals and businesses most in need. Our organizations stand ready to work with Congress on solutions that provide the necessary relief as soon as possible,” the letter said.

Separately, Rep. Velazquez introduced legislation to provide other relief for small businesses during the COVID-19 outbreak. The COVID-19 Relief for Small Businesses Act of 2020 would provide zero-interest direct loans to small businesses, direct grants, loan debt relief and would seek to increase access to federal contracting opportunities, among other provisions.

In addition to responding to the letter from Congress, NAMIC said it worked to oppose legislation proposed in New Jersey that also sought to retroactively cover small businesses for COVID-related interruptions—specifically any business with less than 100 employees in New Jersey with a policy of business interruption insurance in force on March 9, 2020, regardless of whether the policy had a virus exclusion. NAMIC offered a statement strongly opposing N.J. Assembly Bill 3844.

“The proposed retroactive application legislation would fundamentally change the agreed upon transfer of prospective risk of loss exposure to coverage for a known and presently occurring loss, something the parties did not agree to, the insurer did not rate for, and the policyholder did not pay for,” wrote NAMIC Northeast Regional Vice President Christopher Stark. Stark also pointed out the potential unintended consequence of delaying Small Business Administration loans, as the SBA will likely ask applicants to disclose insurance payments before receiving funds.




Chef Thomas Keller sues insurer over coronavirus business interruption claims

Chef Thomas Keller, whose restaurants collectively hold a total of seven Michelin stars, has filed a suit against his insurer over business interruption claims related to the COVID-19 pandemic.

The suit, filed by attorney John Houghtaling against insurer Hartford Fire Insurance Company, requests that the court make a legally-binding decision on whether Keller’s policy allows him to recover business losses sustained in connection to the outbreak.

Restaurant Hospitality reported that the lawsuit was filed in the Superior Court of California County of Napa.

In a release, Houghtaling explained that Keller’s business interruption claim was turned down because Hartford said that there were no “dangerous conditions” at the restaurants.

“To avoid payments for a civil authority shut down the insurance industry is pushing out deceptive propaganda that the virus does not cause a dangerous condition to property,” the attorney said. “This is a lie, it’s untrue factually and legally. The insurance industry is pushing this out to governments and to their agents to deceive policyholders about the coverage they owe.”

Houghtaling also said that the suit is intended to create a legal precedent – so that other businesses mandated to close shop due to the coronavirus can claim on their business interruption coverage.

CNN Business reached out to The Hartford – the parent company of Hartford Fire Insurance Company – for a statement, but the company’s representative declined to comment on the lawsuit.

Read more: US insurers face political pressure to pay out for pandemic-related claims

Business interruption insurance typically does not include coverage for communicable diseases such as the current coronavirus outbreak, but legislators recently signed a bipartisan letter requesting insurers to recognize financial losses resulting from the pandemic for purposes of the coverage.

Read more: State looks at legislation to void coronavirus exclusion clauses

Other legislators are taking a more direct approach to making insurers pay for business interruption claims related to the viral epidemic. The state of New Jersey is drafting a bill that, once passed, would require insurers to indemnify their insureds for business losses incurred following the coronavirus-driven state of emergency declaration.



US insurers face political pressure to pay out for pandemic-related claims

Insurance companies are being pressured by the federal government to pay for the massive influx of business interruption insurance claims filed in the wake of the COVID-19 pandemic – something the industry is worried could lead to not just insolvencies, but the destabilization of the entire economic landscape.

Last week, 18 legislators of the House told insurance trade groups that their members should recognize financial losses triggered by the outbreak as part of their policyholders’ business interruption coverage. The bipartisan letter was signed by 12 Democrats and six Republicans.

In response, state insurance regulators this week issued a warning that forcing insurers to pay for the numerous business interruption claims could bankrupt the sector, Politico reported.

Even the insurers themselves are concerned about how paying for all business interruption claims could impact the industry.

“If policymakers force insurers to pay for losses that are not covered under existing insurance policies, the stability of the sector could be impacted,” said American Property Casualty Insurance Association (APCIA) president and CEO David Sampson in a recent statement.

Read more: American Property Casualty Insurance Association reveals coronavirus focus

To help find an alternative solution, insurance trade associations such as the APCIA and the Reinsurance Association of America have initiated discussions with other business trade groups about the creation of a federal program that could direct money to affected businesses.

One of the proposals being discussed among the trade groups is a “Federal Business Interruption and Workers’ Protection Recovery Fund” that is modeled after the September 11 Victim Compensation Fund, which would make assistance available to all businesses.

Read more: Upton Group calls for government to create insurance program for restaurants

Sampson confirmed with Politico that APCIA is “discussing public policy options with many industry and stakeholder groups.” The president also recognized the need for “liquidity solutions” for the business community amid the pandemic, and said that the association has yet to settle on a specific proposal.

“Ideally, if they want to deliver the money quickly, they won’t put insurers in the middle,” National Association of Mutual Insurance Companies senior vice-president of government affairs Jimi Grande told Politico. “But we want to be available to help if that’s ultimately the way they go.”



Theater Owner Seeks $1M Payout Under 'Pandemic' Clause

Law360 (April 6, 2020, 3:50 PM EDT) -- A Texas theater owner is taking a group of underwriters at Lloyd's of London to court after the insurers said they would not pay out on a $1 million policy for shutdowns resulting from COVID-19, claiming the denial flies in the face of a "pandemic event endorsement" in the policy that specifically covers coronavirus-related disease.

SCGM Inc., which owns a group of theaters including Star Cinema Grill and Hollywood Palms Cinema, said in its complaint Friday that it went out of its way to get the endorsement in the policy, and paid a premium for it, because of the "catastrophic" effect a pandemic would have on its business.

According to the complaint, Lloyd's marketed the pandemic event endorsement following the 2014 Ebola outbreak, advertising it as filling the gaps that other insurers wouldn't after other companies created exclusions in their policies to avoid paying out in the event of another outbreak.

But when SCGM contacted Lloyd's after local and state officials ordered business shutdowns and social distancing measures, Lloyd's told the theater chain COVID-19 is not covered under the endorsement because it is not a named disease under the endorsement.

According to the complaint, however, the endorsement specifically lists "mutations or variations" of "Severe Acute Respiratory Syndrome-associated coronavirus [SARS-CoV]" among the pathogens it covers.

The world scientific community has made it clear that the virus causing COVID-19 is a variation of SARS-CoV, sometimes known as SARS-CoV-2, according to the complaint.

SCGM wrote that Lloyd's refusal of coverage is a "knee-jerk reaction" that is unreasonable, and the speed at which it told SCGM the disease isn't covered — only days after SCGM made the request — shows the insurer did not adequately investigate the claim.

"On its face, Lloyd's conduct appears to be nothing more than an attempt to put insureds in a position where they will be forced to accept lowball settlement offers simply from the fear that their insurer will drag out proceedings well past the insured's ability to remain financially viable," SCGM said in the complaint.

Michael A. Hawash of Hawash Cicack & Gaston LLP, representing SCGM, said Monday he believes this is the first suit against Lloyd's over the pandemic event endorsement, but said he expects more to come as other companies seek reimbursement under the endorsement.

He said Lloyd's interpretation — that COVID-19 is not a named disease covered by the policy — is a very narrow view of the clause since it states that it does cover variations on SARS-CoV.

Hawash added he's looking forward to getting the case to a judge to interpret how the policy should be read.

A spokesperson for Lloyd's declined to comment.

Underwriters at Lloyd's have come under fire from a number of policyholders in the weeks since U.S. businesses began closing in efforts to stem the spread of COVID-19.

In Florida federal court last week, Prime Time Sports Grill Inc., which operates Prime Time Sports Bar in Tampa, sued Lloyd's for its denial of coverage after the state governor ordered nonessential businesses to shut down. And in March, Lloyd's was hit with a suit over the COVID-19 shutdown by a restaurant in New Orleans.


Diner Says Missing Exemption Entitles It To COVID-19 Payout


Law360 (April 20, 2020, 9:32 PM EDT) -- A Chicago-area diner says its insurer omitted an industry-recommended exemption for coverage due to a virus and that the missing exemption means it’s entitled to coverage for lost revenue from the COVID-19 pandemic.

In a proposed class action filed Sunday on behalf of other Illinois restaurants and bars covered by Erie Insurance Co., Chicago area PGB Restaurant Inc. says Erie is wrongly refusing to cover lost income and extra expenses the diner has incurred after it closed under a statewide public health order.

PGB, which operates as Mother’s Day Restaurant, says unlike what is often seen in other insurance policies, the specific policies purchased by the restaurant and other businesses don’t include virus exemptions for lost income. The Insurance Services Office, a leading industry advisory board, began recommending the exemption following the SARS outbreak, but Erie didn’t include it in the policy it sold to PGB, according to the complaint.

“We have companies that chose this insurance, and now it’s time for the underwriters to provide this coverage, and they’re not doing it,” said Christopher Esbrook of Esbrook Law LLC. “We’re just holding them to provide the benefit of the bargain that they have been paying for all along.”

The suit is seeking financial relief from the insurance company and a judgment that the lost income directly results from property loss or damage.

A spokesperson for Erie said Monday that it doesn’t comment on ongoing litigation, but that business interruption insurance “is generally not designed or priced to include pandemic outbreaks and premiums are not collected based on providing coverage against communicable diseases.”

PBG says it estimates there are hundreds “and likely thousands” of other businesses in the same boat that it wants to be part of the class.

The suit is the latest in a string of similar complaints sparked by the pandemic that has resulted in stay-at-home orders and the shuttering of “nonessential” businesses in states across the country.

Those other suits include complaints filed on behalf of restaurants and companies in states across the country experiencing mandatory shutdowns.

For instance, two pubs in Pittsburgh filed complaints against Erie Insurance on Friday, claiming the insurance company has ignored the harms caused by the mandatory closures.

In Florida, a restaurant group with locations in Miami and elsewhere in the state has sued Lloyd’s of London, claiming that their all-risk insurance plans should cover the catastrophic impacts of the coronavirus closures. A movie theater company in Texas also sued Lloyd’s, claiming it paid a premium for its policies knowing how devastating a pandemic could be.

The attorneys representing PGB Restaurant Inc. have filed a similar suit against the Wisconsin insurance company Society Insurance.

PGB Restaurants Inc. is represented by Robert R. Duncan and James H. Podolny of Duncan Law Group LLC, as well as Christopher J. Esbrook and Michael Kozlowski of Esbrook Law LLC.

Counsel information for Erie was not immediately available.

The case is PGB Restaurant Inc. et al., v. Erie Insurance Company, case number 1:20-cv-02403, in the U.S. District Court for the Northern District of Illinois.


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