Businesses Cannot Count on Business Interruption Coverage to Combat Covid-19

On May 27, 2020, Levin Ginsburg published a blog post ( on a fast-developing legal situation in the business and insurance coverage community due to the COVID-19 pandemic. Specifically, as businesses were required to comply with states’ closure orders and social distancing guidelines, many submitted claims to their insurers under their policies’ business interruption coverage. Since that time, there have been significant developments regarding these business interruption claims.

Many businesses received notifications from their insurers rejecting the requests for insurance coverage from losses stemming from the COVID-19 pandemic and resulting state closure orders. Some requests for coverage were denied because the policies contained a “viral exclusion” that excluded coverage for damages caused by a virus. Other claims were denied on the basis that the virus and/or the state closure orders did not cause “direct physical injury or damage” as required by business interruption policies.

Businesses did not take these rejections lying down. Instead, many filed individual or class action declaratory judgment, breach of contract, and bad faith lawsuits against their insurers. Businesses generally asserted theories that: 1) the possible presence of COVID-19 constituted “direct physical loss or damage” under the policy; or 2) the state’s closure order constituted an act of “civil authority” for which there was coverage.

In response to these lawsuits, insurers have filed many successful motions to dismiss. Courts across the country have generally agreed that there is no coverage under the insurance policies’ “civil authority provision” because the state closure orders do not prohibit access to the insured premises, but rather, prohibit the business from operating. Additionally, courts have held that these lawsuits do not involve an “actual physical loss or damage” contemplated by the policy.

To date, twenty-two defendant insurers have dismissed business interruption coverage claims. Conversely, six plaintiff insureds have survived a motion to dismiss. An example of a successful insured occurred in Studio 417 v. Cincinnati Ins. Co., pending in the Western District of Missouri, the district court denied Cincinnati Insurance Company’s motion to dismiss and allowed the claim to go forward based on the allegation in the complaint that COVID-19 is a physical substance that attached to and deprived them of their property, resulting in direct physical loss to the property. Although the plaintiff survived a motion to dismiss, it will likely have to prove that COVID-19 actually was present at the premises in order to prevail on its claim.

Whether a business can successfully advance a business interruption lawsuit against its insurer will depend on the language contained in the policy, the nature of the business, facts demonstrating exposure to COVID-19, and the creativity of the insurance coverage attorney.

If you have questions regarding your insurer’s coverage obligation with respect to the COVID-19 pandemic or any other insurance coverage matter, please contact: Roenan Patt, Associate Attorney at Levin Ginsburg, at (312) 368-0100 or any of our attorneys at Levin Ginsburg.