<p style="text-align: justify;">Earlier this week, a federal judge in the U.S. District Court for the Southern District of Florida dismissed a lawsuit seeking coverage for losses associated with the COVID-19 pandemic. In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/12/El-Novillo.pdf">El Novillo</a> Restaurant, et al. v. Certain Underwriters at Lloyd’s, London, et al.,</em> the plaintiffs filed suit seeking coverage for business income losses due to Covid-19. In response to the amended complaint, the defendants filed a motion to dismiss.</p>
<p style="text-align: justify;">In support of their motion, the defendants argued that the complaint did not contain any allegations that the insureds’ losses are the result of “direct physical loss of or damage to” the insureds’ properties sufficient to trigger coverage.</p>
<p style="text-align: justify;">The plaintiffs opposed the dismissal, arguing that the policy is an “all-risk” property insurance policy. They argued that the policy “covers loss or damage to the covered premises resulting from all risks other than those expressly excluded.” The plaintiffs argued that the policy’s definition of “direct physical loss of or damage to property” is broad and encompasses more than mere structural damage to property. Accordingly, the plaintiffs argued that the policy provides coverage for the business income losses due to the COVID-19 pandemic.</p>
<p style="text-align: justify;">Citing the specific language of the policy, the court held that the plaintiffs failed to sufficiently allege that their properties sustained property damage. In making this determination, the court cited other federal district courts – including, inter alia, the Middle District of Florida, District of Minnesota, Central District of California, Southern District of Alabama – that dismissed similar COVID-19 related lawsuits for failing to state a claim for business income coverage.</p>
<p style="text-align: justify;">This case is an example of the trend that the courts are taking with respect to coverage for losses due to COVID-19 closures. Significantly, this decision emphasizes the importance of the plain language of the policy and how, in the context of the COVID-19 pandemic, courts are unwilling to expand the definition of “direct physical damage” to provide coverage for economic losses when no tangible property damage is sustained.</p>
Thanks to Lauren Berenbaum for her contribution to this post. Please contact <a href="mailto:Haquino@wcmlaw.com">Heather Aquino</a> with any questions.