COVID-19 Business Interruption Protection Insurance Litigation


by, Lexicon Legal

COVID-19 has presented litigators across the country with novel legal issues. One of the most prevalent issues in the era of coronavirus is business interruption claims filed against a commercial insurer. The National Law Review reports that over twelve hundred cases had already been filed as of October 2020 in all fifty states. About a third of these cases had been filed by bars and restaurants, and about a third of the cases included a bad faith claim against the insurer. So far, the results have skewed heavily in favor of insurers. According to the University of Pennsylvania Carey Law School, by December of 2020, a total of 83 of these cases had been dismissed fully with prejudice. Compare this with 24 cases that had been fully dismissed without prejudice and 27 cases that had critical motions denied.


Litigators know that the outcome of a case can change in an instant. Plaintiffs have won some of these business interruption cases, and experienced plaintiffs’ lawyers will be able to use these rulings to advance their own positions. The Defense Bar likewise will be prepared to use favorable precedent in its own arguments. This is why it is so important for COVID-19 insurance litigators to stay up to date on all the rulings that will affect the many issues in their cases.



One key procedural issue facing COVID-19 litigators is the consolidation of business interruption cases. With so many claims stemming from the ongoing global pandemic, courts are eager to conserve resources wherever possible. But not all cases will be eligible for consolidation. The United States Judicial Panel on Multidistrict Litigation has already explored this issue throughout 2020. Most recently, the Panel was able to examine cases that it had declined to centralize in the past and contrast them with cases that it ordered to be centralized in December 2020. This thorough analysis gives litigators an extremely detailed guide for making arguments for or against centralization in future cases.


So what is the standard? The Panel looked to critical commonalities in the cases to determine whether centralization was appropriate. For example, a regional insurer that operated in, at most, six states was found to be the appropriate subject of centralization. But centralization was denied in a case against Lloyd’s of London, as the structure of the London market was likely to complicate pretrial management, and centralization would likely include other insurers in the London market (further complicating pretrial management). The Panel also noted the existence of a “common factual core” in the cases. Previous decisions had found that additional or differing legal theories did not preclude centralization when this “common factual core” is present. Without articulating the test specifically, these issues allude to a balancing test in which the interests of judicial efficiency through centralization is weighed against the complications of centralization in a particular case.



Procedural issues are not the only novel legal issues that come up in COVID-19 litigation. The substance of insurance policy language has already been the deciding factor in many cases. After the SARS outbreak of 2003, many insurers began adding virus waivers to business interruption policies. These waivers have resulted in outright dismissals of many business interruption cases. But even with such policy language, it is possible to overcome a motion to dismiss and try a business interruption case on the merits. The Insurance Journal reports that a Florida gynecologist filed a business interruption case after his claim was denied by Sentinel Insurance Company. Though his insurance policy contained a virus waiver, the doctor’s lawyers argued that the policy language was ambiguous, and the court agreed. Sentinel’s motion to dismiss was denied, and the case will proceed on the merits.


Another common problem faced by business interruption plaintiffs: many policies are written to require direct physical loss or damage to the policyholder’s property. Construed narrowly this means that business interruption from government shutdowns did not qualify as a covered loss. Many courts read the policies conservatively and interpreted this provision narrowly – especially at the beginning of the pandemic when the scope of the pandemic – on a financial, medical, and legal scale – was not yet known. As the virus has raged on, some courts have been more willing to apply a more liberal definition and find that government shutdowns preventing the operation of a business are, in fact, a covered loss.


These are just two of many examples of substantive legal issues that can arise in the litigation of a business interruption insurance policy in the COVID-19 era. There are many exclusions in business interruption insurance policies, and prior to 2020, none of them mentioned the coronavirus. This means that there is room on both sides to argue whether such exclusions apply to COVID-19 claims. Still, previous decisions and the new body of developing COVID-19 case law give litigators guidance in this area. Litigators must stay up to date on all cases involving similar policy language – especially those cases that are decided in their own jurisdiction.



COVID-19 litigation will work its way through the state and federal courts of the United States for years to come. The delays will be substantial: increased business interruption claims and decreased court operations during the pandemic have created a backlog of civil cases. In many courts, civil cases have been further delayed in favor of criminal cases, where defendants have the constitutional right to a speedy trial. Though aggravating to clients, these delays give litigators plenty of time to arm themselves with the most current case law, data, experts, and other evidence. Guidepoint can connect you with the experts, data, and research that will help you make better arguments on behalf of your clients. Contact us today to learn about how our services support your practice throughout every phase of litigation.


Please note: This article contains the sole views and opinions of Lexicon Legal Content and does not reflect the views or opinions of Guidepoint Global, LLC (“Guidepoint”). Guidepoint is not a registered investment adviser and cannot transact business as an investment adviser or give investment advice. The information provided in this article is not intended to constitute investment advice, nor is it intended as an offer or solicitation of an offer or a recommendation to buy, hold or sell any security. Any use of this article without the express written consent of Guidepoint and Lexicon Legal Content is prohibited.


Learn how Guidepoint Legal Solutions can provide expertise throughout the litigation cycle.