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NJ Appellate Division Continues National Trend Rejecting 6 Plaintiffs’ Claims for Business Income Loss as a Result of COVID Mandates

June 24, 2022

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The national trend rejecting pandemic business income loss claims continues. In a consolidated appeal, on June 20, 2022, the <a href="">New</a> Jersey Appellate Division decided against six companies that sought insurance coverage for business income losses sustained after New Jersey Governor Murphy’s Executive Orders required them to limit or close their businesses in the early days of the COVID pandemic.
<p style="text-align: justify;">The plaintiffs in the respective cases – owners and operators of a gym, a day care, a baked goods store, three restaurants – brought breach of contract and/or sought declaratory judgments against insurers that denied their claims for Covid business income losses as a result of the government orders.</p>
<p style="text-align: justify;">The respective defendant insurers – Selective Fire and Casualty Insurance Company, Markel Insurance Company, Blackboard Insurance Company, Wesco Insurance Company, Amtrust Insurance Company, Philadelphia Indemnity Insurance Company – moved to dismiss with prejudice under Rule 4:6-2(e) arguing that the insurance policies, which the Appellate Division found to all be “essentially identical,” did not cover plaintiffs' business losses because the suspension of their businesses due to the Executive Orders was not a “‘direct physical loss of or damage to’ their insured premises.”</p>
<p style="text-align: justify;">The Court also rejected plaintiffs’ arguments that the business income losses were covered by the policies’ “Civil Authority” clauses, looking to other courts for persuasive guidance. The Court further rejected plaintiffs’ claims that the lower courts should have given them the opportunity to amend their complaints to add regulatory estoppel claims based on alleged misrepresentations made by the insurance industry about virus exclusion provisions. Noting that the business income losses were not covered under the policies anyway, irrespective of whether the virus exclusions applied, the Court held that any such amendments would have been futile.</p>
Lastly, the Appellate Division agreed with the insurers that the plaintiffs’ claims could be rejected on the basis of the policies’ virus exclusions.

Thanks to Abed Bhuyan for his contribution to this post. Please contact<a href=""> Heather Aquino</a> with any questions.


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