Courts Dismiss COVID-19 Business Interruption Claims

On November 21, 2022, the Supreme Court denied certiorari for Bel Air Auto Auction, Inc. v. Great Northern Ins., Co., where a Maryland auto dealer sought review of the denial of coverage for its COVID-19 business interruption claims.

On November 22, 2022, the Ninth Circuit affirmed the dismissal of a restaurant and entertainment venue operator’s COVID-19 business interruption claim. The court concluded that the insured failed to state a claim under New York, Illinois, or California law because its claims all rested on the premise that its properties suffered direct physical loss or damage and it did not allege such loss under each jurisdiction’s law. Opinion at 5. It found that, under New York law, an insured’s allegations that “its property was unusable for its intended purpose or physically altered by the presence of COVID-19 are insufficient to state a basis for coverage where the insurance policy requires direct physical loss or damage to property,” that the “presence of COVID-19 on an insured’s premises and associated loss of use of the property are likewise insufficient to trigger property insurance coverage under Illinois law,” and that, under California law, “loss of use of property does not constitute ‘direct physical loss of or damage to’ property.” Opinion at 3-4. The case is Tao Group Holdings, LLC v. Employers Ins. Co. of Wausau.

On October, 11, 2022, the California Court of Appeal affirmed the dismissal of a shuttle bus manufacturer’s COVID-19 business interruption claim. The court found that “[i]t is now widely established that temporary loss of use of a property due to pandemic-related closure orders, without more, does not constitute physical loss or damage.” Opinion at 6. The case is Grech Motors, Inc. v. Travelers Prop. Cas. Co. of Am.