Language matters. In the coming weeks, months and years, we will see how much language matters as COVID-19 insurance disputes are litigated.
One particular quirk of language that I have been following closely relates to government shutdown orders due to COVID-19. Local, city and state government officials are, intentionally or unintentionally, making statements that could be read to support property insurance claims.
How a court of law in a particular jurisdiction will interpret these statements is beyond the scope of this article; instead, the purpose of this and subsequent articles is to survey how government officials are justifying government shutdowns and how this may intersect with insurance.
The Physical Damage Requirement
In order to understand why government rationales for a shutdown may matter, it is important to first understand that insurance coverage attorneys generally believe there are two key bars to COVID-related business interruption claims.
First, commercial insurance property policies generally require physical damage to the insured property. Second, commercial property insurance policies in the United States generally exclude viruses. An Aon Bulletin summarizes the “physical damage” requirement and why it likely bars commercial property claims:
“The trigger for any property insurance policy and resulting time element coverage is physical damage to insured property by an insured peril. Insurers are likely to argue that the introduction of a virus does not constitute direct physical loss or damage to insured property nor is it a covered peril.”
However, attorneys representing businesses are already contesting the “physical damage” requirement.
The first known lawsuit related to COVID business interruption coverage arose in New Orleans, Louisiana. According to the law firm White and Williams, the “suit was filed in a Louisiana state court by a restaurant seeking a declaration of coverage for coronavirus-caused losses under a business interruption policy.” According to White and Williams, the complaint details how coronavirus allegedly created physical damage to the restaurant:
“(T)he global pandemic is exacerbated by the fact that the deadly virus physically infects and stays on the surface of objects or materials, ‘fomites,’ for up to twenty-eight days, particularly in humid areas below eighty-four degrees.”
“[It is] clear that contamination of the insured premises by the Coronavirus would be a direct physical loss needing remediation to clean the surfaces of the establishment.”
The Curious Emergency Order in New Orleans
As I researched the case, I came across a related statement embedded in the New Orleans Emergency Proclamation dated March 16, 2020:
While I have not been able to identify comments from New Orleans Mayor Latoya Cantrell, the Restaurant’s attorney in the aforementioned lawsuit, John Houghtaling, suggested the Order’s language would bolster his client’s claim. You can view the full audio or the relevant transcription below:
4WWL Newscaster [00:00:25]The claim got a boost when Mayor Latoya Cantrell filed an order in the same court, saying the Coronavirus is causing damage to business property.
Plaintiff’s Attorney John Houghtaling [00:00:35]Our hope is that we can confirm the obligations of the insurance companies. And this could affect not just businesses in Louisiana. This can affect businesses across America.
However, according to Defense Attorney Steve Badger, the New Orleans Order is part of a larger government-law firm movement to create insurance coverage:
“’So, what’s happening is some creative plaintiffs’ lawyers are getting into the offices of government and saying, Hey, include this language in your civil authority orders. And maybe that will help us trigger coverage. It won’t,’ Badger said.”
Is Government Support for Property Claims Widespread?
Over the last week, the RiskGenius team has been reviewing state, city and local Emergency Orders to determine if language supporting property claims, like that in New Orleans, is being widely used. In the coming days, we will be disclosing the results of our ongoing analysis.