The US and the UK has seen a stream of legal claims after Covid-19 closures affected the events and hospitality sector. Many businesses in the UK have banded together to sue Hiscox and others, using celeb law firm, Mishcon de Reya. The cases are often complicated by arguments surrounding what constitutes cover on pandemic or viral infection outbreaks locally, and if the policy wording means that a blanket government ban on dining out, or indeed opening any public space business, still kicks in when a national or global lockdown is in force.
The issue of wording seems to have been at the heart of the judgement in Michigan:
Judge Joyce Draganchuk of Michigan’s 30th Circuit Court ruled on July 1st that some tangible alteration to a property is required to trigger coverage. What’s more, a virus exclusion in the property insurance policy would have barred a payout on the claim, even if the claimants had alleged the virus did cause physical damage, the judge summarised.
Michigan Insurance, a subsidiary of Donegal Group, denied a $650,000 business interruption claim by chef Nick Gavrilides, owner of Soup Spoon cafe in Lansing and The Bistro in nearby Williamston. The restaurant owners’ legal team had argued that an insurance coverage payout was due under the civil authority provision of the policy, and that a virus exclusion in the policy was void because it was ambiguous.
But Judge Draganchuk rejected the argument made by attorney Matthew Heos of the Nichols law firm: that the government order that restricted business to dine-in only, amounts in effect to a physical loss, because the order effectively blocks any public entry to the property.
“That argument is simply nonsense,” she commented.
The judge also repeated the terms of the policy, and noted that the complaint states that the virus was never even on the property.
“There has to be something that physically alters the integrity of the property,” she said. “There has to be some tangible, i.e. physical, damage to the property.”
The crux of the judgment was that the virus harms people, not property, and therefore a commercial insurance policy designed to protect the asset, or its use as commercial premises, is not a case of a business site itself being harmed by the virus. A similar theory was used to deny a claim by a magazine publisher in the USA recently, who could not print any issues. In that judgement it was noted that a virus attacks lungs, not printing facilities.
That may be true, but the issue of policy wording and what it means in practice is likely to be tested in courts again this year, several times, in the USA and the UK.
In Ohio recently Dante Restaurant chain successfully won a judgement in its favour on the matter of policy wording regarding business interruption, with a preliminary damages award of $250,000. Plus the actual claim amounts being paid out, on a site-by-site basis, so the financial impact for each restaurant site would be assessed as an individual loss scenario.