Wade Clark Mulcahy LLP

<p style="text-align: justify;">The nationwide wave of insurance coverage litigation in the wake of the Covid-19 pandemic has made its way to New York.  On April 17, on behalf of a similarly situated class, Gio Pizzeria &amp; Bar Hospitality and Gio Pizzeria Boca filed <em><a href="https://www.law360.com/articles/1264963/attachments/4">suit</a> </em>in the Southern District of New York against Certain Underwriters at Lloyd’s London.  The class action was brought on behalf of all insureds who were issued similar policies with similar coverage grants by Underwriters.  While neither named plaintiff operates in New York, their policies specify that service can be effectuated against Lloyds’ on their agent in New York.  The insureds seek to recover lost business profits resulting from the closure of their properties in the wake of civil authority orders issued by Florida Governor Ron DeSantis.</p>
<p style="text-align: justify;">The policies at issue contain a Special Liability Coverage form, which includes Business Income, Civil Authority, Extra Expense, and Sue and Labor coverages.  Unlike many policies providing business interruption coverage, the policies do not contain specific virus exclusions.  Therefore, the primary issue is for business interruption purposes is whether the virus constitutes “damage to property,” a prerequisite for such coverage.</p>
<p style="text-align: justify;">Seeking to get out ahead of this argument, the Complaint includes a quote from a statement issued by the Insurance Services Office (“ISO”), which provides:</p>
<p style="text-align: justify;">Disease-causing agents may render a product impure (change its quality or substance), or enable the spread of disease by their presence on interior building surfaces or the surfaces of personal property.  When disease-      causing viral or bacterial contamination occurs, potential claims involve the cost of replacement of property (for example, the milk), cost of decontamination (for example, interior building surfaces), and business interruption (time element) losses.   Although building and personal property could arguably become contaminated (often temporarily) by such viruses and bacteria, the nature of the property itself would have a bearing on whether there is actual property damage. An allegation of property damage may be a point of disagreement in a particular case.</p>
<p style="text-align: justify;">The key issue in this case, and indeed in every case involving similar policies, is whether the “damage” caused by the pandemic constitutes property damage.  Given that these arguments are now being made for the first time throughout the country, it remains to be seen how receptive courts will be.  That said, insofar as the policies at issue in here do not contain specific “virus” exclusions as many policies do, this case presents the best opportunity for insureds to succeed.  We will continue to monitor all Covid-19 litigation.</p>
<p style="text-align: justify;">Thanks to Doug Giombarrese for his contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.</p>