Two years after comprehensive lockdowns went into effect to prevent the spread of COVID-19, the case law is Escalation in favor of insurance companies that were sued for the denial of the claims.
A federal judge in California on Wednesday definitively dismissed the Creative Artists Agency’s lawsuit against subsidiary FM Insurance for refusing to cover losses related to business shutdowns imposed by the virus. After a long run of precedent, US District Judge Andre Beirut Jr. has found that “direct material loss or damage” policies do not cover the policy’s claims related to the pandemic.
When local governments began issuing stay-at-home orders in 2020, billions of dollars in claims — many businesses involved in live entertainment and events — poured in across the country. But instead of paying, the insurance companies looked at the nitty-gritty and collectively denied. The industry collectively found that business interruption policies for lost revenue exclude coverage for pandemic shutdowns, claiming that physical loss or property damage was required. A legal war broke outMore than 2,300 lawsuits have been filed to challenge coverage decisions, according to COVID-19 Insurance Litigation Tracker It was created by Pennsylvania law professor Tom Baker. Nearly 92 percent, or 792 of the 862 cases considered for separation, were discarded.
as much CAAThe lawsuit, like others, swung about whether there was a “material loss” of the insured property. The agency claimed that its losses were a “direct result of material losses and damages” based on the closure orders issued by the civil authority. It said the physical presence of the virus in the air and on rooftops made its buildings unusable.
Beirut rejected the argument, finding that the CAA had failed to determine how virus particles caused “material alteration” to its buildings. He wrote, “For example, there must have been an outside force that acted on the insured property to bring about a material change in the property’s condition.”
in Ins of the Sea v. California Mutual Insurance Corporation. , the first case before the California Court of Appeals involving a dispute over COVID-19 coverage, it was found that hotels also failed to identify any direct physical damage to property that led to the suspension of their operations despite allegations that the virus was present on their premises.
The nearly identical lawsuit brought by the United Talent Agency against its insurer, Vigilant Insurance, ended the same way. “In the wake of the COVID-19 pandemic, several insureds have asserted UTA-like arguments, and the majority of courts have rejected them,” reads an April order from a state appeals court confirming the dismissal of the case. “It has now been widely established that temporary loss of property use due to pandemic-related closure orders, without further, does not constitute direct material loss or damage.”
The judge also denied coverage under a clause in the Civil Aviation Authority’s policy that allegedly covered business interruption losses incurred by civil authority orders. Beirut found that the orders were issued to prevent the spread of COVID-19, not as a result of physical damage to property.
Regardless, the Civil Aviation Authority had a clause in its policy that excluded coverage of “any cost due to pollution including the inability to use or occupy the property or any cost to make the property safe or suitable for use or occupancy.”
Beirut found that the CAA could not argue that the civil authority’s closure orders had been issued in response to COVID-19 and that the virus was the “effective direct” cause of the loss incurred. “Many courts within this district have held that similar pollution exclusion provisions prohibit coverage even if plaintiffs are able to demonstrate that they have suffered physical loss or damage ‘to their premises,'” the order said.
The agency was not given an opportunity to redress its claims because it failed to identify any additional allegations it could include in an amendment to salvage the lawsuit, “particularly when considering binding precedent dismissing their claims.”
73 lawsuits have been filed by companies in the live arts and sports industry, according to the COVID-19 insurance claims tracker.
The CAA declined to comment. The affiliate and its attorneys did not respond to requests for comment.