Beginning in January 2021 and for a few months thereafter, we digested a number of cases dealing with insurance companies and coverage, or lack thereof, for COVID-19-related economic losses and lost profits. January 2021 is about the time that these cases began to show up in case decisions throughout the country. Plaintiffs typically are businesses that have suffered economic losses because of various mandatory shutdowns. They file claims with their insurance agency, which frequently denies coverage for business interruption losses. However, more often than not, courts have sided with the defendant insurance company and dismissed the plaintiff’s case or ruled against the business owner.
There was then and are now a myriad of reasons why the courts either do or do not allow or dismiss the claims. It will no doubt take years before the dust settles on many or all of these cases, and we suspect that there will be decisions falling on both sides, plaintiff or defendant, of the spectrum. It is doubtful that these cases will reach the U.S. Supreme Court, and, thus, it might depend on what state or even locality the suit ultimately resides in as to what the ultimate decision might be.
We stopped digesting the cases at some point in 2021 for the above noted reason, i.e., there likely will not be a uniform resolution. However, as these cases mature, significant cases or related events might occur. When they do, we will bring them to you. And we would encourage and ask for your assistance in knowing about these events, whether in the courts or through legislation of some sort (which would likely only apply to future such events as the COVID-19 pandemic).
Stephen Kirkland, of Columbia, S.C., was nice enough to send us a recent South Carolina Supreme Court case on this very subject. The case, Sullivan Management v. Fireman’s Fund,1 answered a certified question from the District Court as follows:
Does the presence of COVID-19 in or near Sullivan's properties, and/or related governmental orders, which allegedly hinder or destroy the fitness, habitability or functionality of property, constitute "direct physical loss or damage" or does "direct physical loss or damage" require some permanent dispossession of the property or physical alteration to the property?
In a direct and to the point response, the South Carolina Supreme Court answered, “The answer to this question is no because the presence of COVID-19 and corresponding government orders prohibiting indoor dining do not fall within the policy's trigger language of ‘direct physical loss or damage.’"
This seems to follow, as noted above, the majority trend in the solution of similar cases. However, some courts in preliminary decisions have allowed the litigation to move forward to the trial phase. Stay tuned. We thank Stephen for alerting us to this case and would ask that others keep us abreast of similar cases in their state or jurisdiction.
1 Sullivan Management, LLC, Plaintiff v. Fireman's Fund Insurance Company, and Allianz GLOBAL Risks, US Insurance Company, Defendants, 2022 S.C. LEXIS 90; 2022 WL 3221920.