This week the Louisiana Court of Appeal found coverage for coronavirus and COVID-19 claims by reading the actual insurance policy language and relying on long-established precedent governing the interpretation of insurance policies. Particularly, the court found that the presence of coronavirus on the insured premises that slowed down the business operations of the policyholder triggered all-risk coverage because it caused “physical loss or damage” to the policyholder’s business property. The court rejected the insurer’s arguments that coverage was not available absent (a) any physical or structural alteration to the property; (b) completely shutting down the policyholder’s business operations; and (c) rendering that property uninhabitable. The court also rejected the insurer’s argument that the policy’s “period of restoration” clause—which indicated the interruption period ends when damaged property is restored, repaired or replaced—required a physical alteration to property, holding the policyholder’s efforts to remove coronavirus by cleaning or disinfection fell within the “period of restoration.”
Since March 2020, more than 2,300 coverage cases have been filed nationwide seeking coverage for business interruption losses relating to the effects of COVID-19. Most claims arise under “all-risk” policies, many (but far from all) such policies have exclusions for loss by virus, and some have sublimits for communicable disease losses. An aggressive insurance industry-funded PR campaign presented a doom-and-gloom scenario that granting coverage would bankrupt the entire industry. Many of the first wave of coverage suits were filed by law firms with little or no substantive experience in insurance coverage, resulting in an early wave of insurer victories. Courts often lumped cases with virus exclusions together with cases that do not have virus exclusions. Still others lumped cases alleging loss solely from government orders together with cases alleging loss solely from the presence of virus on the insured premises. And there are many examples of trial courts making fact findings on virology in flat contradiction to all law on pleadings standards and in total disregard of the actual science of COVID-19 transmission.
The result of these factors was many dismissals and record insurance company profits. But the state appellate courts have only begun their work, and this ruling finding coverage presents a well-reasoned opinion relying on longstanding precedent to reach the correct result under legal standards that apply broadly across the country. The Louisiana Court of Appeal’s decision will serve as an important benchmark for those appellate courts now addressing the same coverage questions.