Insurance coverage

The implications of Covid-19 on insurance cover for business interruption claims and force majeure clauses | Maron Marvel Bradley Anderson & Tardy LLC

Perhaps since the release of the very first executive order ordering businesses to close at the start of the Covid-19 pandemic, lawyers have held their breath, waiting to see how Covid-19 will play out in terms of insurance coverage. , especially as it relates to various policy provisions, including but not limited to business interruption coverage claims.

The first verdict in the United States on whether a commercial property insurance policy covers business interruption losses caused by the Covid-19 pandemic fell in Texas in late September, with a jury returning a verdict. $48.5 million verdict in favor of Baylor College of Medicine. This verdict, split into three compensation categories ($42.8 million for operating loss, $3.3 million for additional expenses and $2.3 million for research losses) results from the fact that the insured succeeded to demonstrate that the facts of the case proved that the virus had damaged his property. Specifically, Baylor successfully argued that its educational, clinical and research work required it to take steps to keep its facilities open to treat patients with Covid-19 and other medical conditions, conduct clinical trials for Covid-19 treatments, and to assess the effectiveness of other treatment options for Covid-19. This unique set of facts enabled Baylor to prove that the Covid-19 virus was physically present at its facilities throughout the entire insurance period in question.

Categorizing the question of whether Covid-19 caused harm as a question of fact means we can expect many more such cases to survive the summary judgment phase of litigation and go to juries. for a decision. Furthermore, the judge’s conclusion on a question of fact related to a virus causing harm represents a departure from previously established law where judges in various jurisdictions had reached the opposite conclusion – that a virus could not cause harm. at law (a prerequisite in many business interruption policies, including the one at issue here).

Covid-19 and its implications on insurance coverage are not only in play in terms of business interruption claims, but we can also expect to see fallout from the pandemic in other avenues including ( but certainly not limited to) the implication and application of force majeure clauses. While the applicability of force majeure clauses in light of Covid-19 remains a matter of first impression in New Jersey in terms of verdict or decision, we can expect to see more cases involving this issue, from especially as other jurisdictions begin to address this issue. publish.

For example, a New York court recently granted summary judgment in favor of a couple who were forced to void their prenup due to Covid-19 related decrees because the force majeure clause in their contract specifically included “government regulations and disasters” as a trigger for the clause, and at the time of the planned wedding date, government regulations were such that the venue would not be able to perform its obligations under the contract. Nelkin v Wedding Barn at Lakota’s Farm, LLC, 152 NYS3d 216, 217 (Civ. Ct. 2020).

This is a developing area of ​​law, and as more New Jersey courts deal with Covid-19 and its profound implications, we will continue to monitor and report on this important topic for insurance companies.