Wade Clark Mulcahy LLP

<p style="text-align: justify;">On July 2, the Eighth Circuit became the first federal appellate court to weigh in on whether a business could recover business interruption losses for COVID-19 related claims. In <a href="https://ecf.ca8.uscourts.gov/opndir/21/07/203211P.pdf"><em>Oral Surgeons, P.C. v. The Cincinnati Insurance Co</em></a>., the court affirmed a federal district court decision from the Southern District of Iowa, which rejected a policyholder’s COVID-related business interruption claim.</p>
<p style="text-align: justify;">The Eighth Circuit reasoned that losing revenue due to government restrictions that limited the policyholder’s ability to fully utilize its premises did not constitute physical loss or damage to property. The court stated, “there must be some physicality to the loss or damage of property — e.g., a physical alteration, physical contamination, or physical destruction.” This interpretation accords with the policy’s provision that it will cover lost business income during the “period of restoration,” which ends when the property is “repaired, rebuilt or replaced.” The court reasoned that only property that had suffered physical damage would require these remedies.</p>
<p style="text-align: justify;">This decision represents a major win for insurers nationwide. While many other courts have already upheld a strict interpretation of physical loss, some outlier decisions had created a fair share of uncertainty. Time will tell if other circuits follow the Eighth Circuit’s lead or a split emerges that warrants a decision from the Supreme Court. We will continue to keep you posted as events progress.</p>
<p style="text-align: justify;">Thanks to Christopher McCarthy for his contribution to this post. If you have any questions or comments, please contact <a href="mailto:chayes@wcmlaw.com">Colleen Hayes</a>.</p>