Issue No. 4 | April 2021
Some restaurants have won an initial victory in their efforts to recoup COVID-related losses through their business interruption insurance policies, as described in In Re: Society Insurance Co. Covid-19 Business Interruption Protection Insurance Litigation.
Three restaurant groups in Illinois sued Society Insurance in federal court after it denied their insurance claims for lost revenue because of suspension of in-person dining and capacity limits.
Society Insurance’s policy stated it would pay covered losses from the suspension of operations, where the suspension was caused by direct physical loss of property.
Society Insurance argued there was no physical loss of property–since the restaurants remained intact. It also said any losses were caused by government shutdown orders, not the virus, and not covered. It asked the Illinois district court judge overseeing the lawsuits to dismiss the cases. The judge rejected the insurer’s arguments. He said a jury could reasonably conclude the shutdown orders effectively limited the use of the restaurants’ space, thereby constituting a direct physical loss. He also said a jury could reasonably conclude the virus proximately caused the business interruption.
Businesses in various industries continue to file business interruption insurance claims for pandemic-related losses—often without much success to date. Although the Society Insurance decision is far from dispositive, it does enunciate some arguments that might be helpful in pursuing such claims.
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