Rare winnings of small companies in insurers’ processes keep hope for payments alive

“I’m delighted to have come this far, but that excitement and gain doesn’t translate into relief until it’s over,” Mr Kelly said.

Cases like Kelly’s keep the hope alive that some small businesses can get insurance money to help them get back from government-ordered closures.

In hundreds of lawsuits across the country, most small businesses have sued their property insurance companies for refusing to pay pandemic-related “business interruption” claims. Many insurers say that their policies contain clear language, with the exception of applications related to viruses, while most applications have not met their criteria.

Many courts have supported insurers in refusing payments, but companies are making progress. Of the approximately 100 decisions on business lawsuits against insurers, about three-quarters were in favor of insurers, according to a Covid-19 litigation effort at the University of Pennsylvania Carey Law School.

Mr. Kelly, 44, intended to open a fifth restaurant as he contracted the coronavirus. Instead, it abandoned these plans and laid off about 100 employees. “It’s depressing,” he said, sitting in the Mateo Tapas Bar still open in Durham. He removed a lid to reveal baldness. “My hair fell out of stress,” he said.

Like many restaurant owners, Mr Kelly said he had incurred a huge amount of debt – about $ 1.3 million in his case – to keep the restaurants open. Two of its four restaurants are currently closed.

Among the challenges for policyholders, coverage for business outage insurance usually requires “direct physical loss or damage” to cause the outage. Insurers usually interpret this as material damage to property that needs repair or reconstruction.

Business interruption coverage is a subset of property insurance and, with few exceptions, insurers say they have not collected premiums for virus-related damage. Instead, most included some sort of SARS – specific virus exclusion from the early 2000s.

The North Carolina ruling indicates the types of complaints that could have the best chance of defending the industry, lawyers say. The policies in the case, which were issued by Cincinnati Financial units Body.

and covered a total of 16 restaurants, did not contain a certain exclusion of the virus.

Mr Kelly’s lawyers have focused on the absence of policy definitions for terms that include “physical loss”. They also argued that previous rulings in North Carolina do not impose requirements for structural damage, as Cincinnati Financial and most other insurers claim.

In a September hearing, Mr. Kelly was disguised and socially distanced from the other restorers, while Judge Orlando Hudson said he would decide in favor of policyholders. In his later written opinion, the judge said that the usual meaning of “direct physical loss” includes “the inability to use or possess anything in the real, material or corporeal world.”

In its documents, Cincinnati Financial claims that its policies do not cover economic damage in the absence of “direct physical loss” to property and said that such loss requires physical damage.

“We continue to believe that business interruption coverage under our property policy in this case does not apply because there has been no structural change in ownership,” said Cincinnati Financial spokeswoman Betsy Ertel. “The prevailing opinion of courts across the country has been that a single economic loss does not qualify as direct physical damage or loss of property, which is the trigger for business interruption coverage.”

The financial losses of the restaurants are to be determined later and could total $ 10 million in the 16 restaurants, said Gagan Gupta, one of the applicants’ lawyers.

At the national level, state and federal courts in recent weeks have taken the pace of ruling on more than 1,300 litigation to cover the disruption of the Covid-19 business since March, according to the University of Pennsylvania Law School database. On December 21 alone, at least four separate federal courts ruled. Three accepted the insurers’ motions to dismiss, and the fourth rejected such a motion and allowed the insured’s case to proceed. Nearly 150 lawsuits have been voluntarily suspended, said Tom Baker, a professor at Penn Law School.

Some insureds have been successful in building judgments for years in which judges have concluded that things like fire smoke, gasoline vapors and carbon monoxide have caused property damage to cover the disruption of the business, lawyers said.

“It will come down to experts saying that, statistically, the virus is likely to be on the property,” said Robin Cohen, director of law firm McKool Smith.

In November, a judge in Clark County, Nev., Rejected an insurer’s request to dismiss a case in which Cohen’s client, JGB Vegas Retail Lessee LLC, claimed the coronavirus spread through infected expired drops “that attach and cause bad other objects. “The insurer filed a request for reconsideration.

Adam Moskowitz, a Florida attorney who represents many policyholders, said insurers “should not be reassured” by their initial success because some involved less experienced attorneys, who started with weak cases.

Insurers’ lawyers acknowledge that tougher fights occur in cases with unique circumstances, brought by law firms with deep insurance experience. But I remain confident that early successes will continue.

“We will litigate legitimate disputes,” said Steven Badger of Zelle LLP, the insurer. “These will be resolved like all disputes concerning insurance coverage, by trial or settlement.”

Write to Leslie Scism at [email protected]