Business Interruption Heats Up
May 27, 2020


As of last week, there were a 101 federal lawsuits filed seeking coverage from insurers for business interruption losses caused by COVID-19.  The cases were tagged by the U.S. Judicial Panel on Multidistrict Litigation, which was created in 1968 to determine whether civil actions pending in different federal districts involve one or more common questions of fact and should be coordinated or consolidated for pretrial proceedings.  The central question binding these lawsuits is whether COVID-19 amounts to a physical loss of property that triggers insurance coverage for business interruption losses. 



A Paris court ruled last week that a commercial insurer must pay a restaurant owner two months’ worth of revenue losses due to COVID-19.  The insurer has agreed to pay this claim and to pay claims where the policy wordings are similar to those involved in the original court case.  Representatives of the carrier maintain that these contracts represent less than 10% of the restaurant book in France and are confident they will find an amicable solution.



In one of the first COVID-19 rulings on coronavirus-related business interruptions, the Southern District of New York ruled in favor of the insurer and found the business income loss due to the COVID-19 lockdown was not covered under its policy.  The court found that under New York law, business interruption coverage was not triggered because physical damage did not prevent the policyholder from entering the property. 



The National Council of Insurance Legislators (NCOIL) reminded Congress in March that insurance policies are contracts between two parties and legislative efforts – from states or Congress – to retroactively enact coverage despite expressed exclusions for communicable diseases would violate the Contract Clause within Article I of the United States Constitution.  With no compromise, the debate over business interruption insurance coverage will most likely be solved by litigation, not legislation.  




Two dams collapsed in Central Michigan last Tuesday following heavy rainfall and flash floods causing over 10,000 people to evacuate and head to shelters in the middle of the coronavirus pandemic.  In Michigan, the average age of the state’s total 1,059 dams is 74 years old, older than the typical 50-year designed life span.  Just over 170 of those dams are labeled as high hazard potential – meaning a collapse will result in a loss of life. 



Unlike roads and bridges, the majority of the nation’s dams are privately owned according to the American Society of Civil Engineers (ASCE).  The ASCE estimated the cost of fixing up the dams whose failure would threaten lives at roughly $45 billion, and the cost of fixing all aging dams at over $64 billion.  The Federal Emergency Management Agency has funding for rehabilitating dams with the highest hazard ratings, but for the past two years that has amounted to just $10 million divided among all states.


Making Our Way Around the Country


The Illinois Legislature approved a COVID-19 workers’ compensation bill that creates a rebuttal presumption that COVID-19 was contracted on the job for first responders, front-line workers, and other essential workers identified in Gov. JB Pritzker’s Executive Order.  To qualify, the employee must have interacted with the public or worked with more than 15 co-workers.  The employee also has to prove they received a positive COVID-19 test or a test showing the presence of COVID-19 antibodies.  The employer can rebut the presumption with evidence, including the employer is following federal and state guidelines through practices like PPEs and social distancing or that the employee was exposed by an alternative source.  The governor is expected to sign this bill.



State lawmakers are working to greatly expand Louisiana’s medical marijuana to make more people eligible for the treatment.   The bill would authorize medical marijuana for any condition that a doctor “considers debilitating to an individual patient and is qualified through his medical education and training to treat.”  The House voted 77-15 in favor of the bill.  The Senate Health Committee voted 5-1 to send the bill to the full Senate for debate.  As always, we’ll keep an eye on how expanded medical marijuana eligibility might impact our industry.



For the first time in 20 years, AAA didn’t issue a Memorial Day forecast due to the lack of traveling and social distancing guidelines.  Last year, 43 million Americans traveled for Memorial Day weekend – the second-highest travel volume on record.  Memorial Day still marks the unofficial start of summer, and those who might start flying should plan for lots of changes and allot for additional time.  As always, we remember those who’ve died while serving our country.


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