top of page

News

NY Continues Statewide and National Trends Rejecting COVID Business Interruption Claims

September 16, 2022

Share to:

<p style="text-align: justify;">Yet another court in New York has ruled against an insured’s lawsuit for breach of contract against the insurer for not covering business losses as a result of the pandemic. In<em> <a href="https://www.wcmlaw.com/wp-content/uploads/2022/09/Spirt.pdf">Spirt</a> Airlines v. American Home Assurance Compan</em>y, Justice Reed of the New York State Supreme Court, New York County, held, as scores of other state and federal courts have held nationwide, that coverage under the policy in question could only be triggered if the coronavirus caused “direct, physical loss or damage” to Spirit’s insured property.</p>
<p style="text-align: justify;">Spirit sought coverage for revenue it lost due to Covid and for costs sustained in modifying its property due to the presence of the virus. The presence of the virus, Spirit argued, impaired the value, usefulness, and functionality of its property.</p>
<p style="text-align: justify;">But that, the Court held, fell short of meeting the standard established by the First Department in April of this year in Consolidated <em>Restaurant Operations v. Westport Insurance Company.</em> In that case, the First Department established that a claimant’s inability to use its premises because of Covid-19 but “without any actual, discernible, quantifiable change constituting ‘physical difference’ to the property from what it was before exposure to the virus” fails to state a claim. According to the policy in that appeal, which was identical in key respects to the one issued to Spirit Airlines, the insured’s property must have been “changed, damaged or affected in some tangible way.” Justice Reed held that Spirit was unable to make the requisite showing to survive the motion to dismiss.</p>
<p style="text-align: justify;">At oral argument, Spirit argued that the First Department decision was on point but incorrect, which was a non-starter for Justice Reed, who follows the “First Department until the Court of Appeals says that the First Department is wrong.” The exchange highlighted the strength of the insurer’s position where the terms of its policy were clear. Justice Reed concluded by adding that on similar facts “there is no New York State court that has determined otherwise.”</p>
Thanks to Abed Bhuyan for his contribution to this post. Please contact Abed with any questions.

Contact

bottom of page