In the face of government mandated closures or significantly reduced business due to COVID-19, business have and continue to be under significant financial pressure. Many have turned to their insurers for relief, invoking business interruption insurance policies. Although insurers successfully defeated many of those claims in court and used early victories as a deterrent against policyholders who later asserted claims, a recent court case provide a glimmer of hope for insureds seeking to recover under their policies.

On January 19, 2021, a judge in the Northern District of Ohio ruled in favor of a restaurant system that was seeking coverage under the business interruption provision of its insurance policy. Henderson Road Restaurant Systems, Inc. operates a number of steak and seafood restaurants in Ohio, Pennsylvania, Michigan, Indiana, and Florida. The group, like so many other businesses, suffered staggering financial losses due to COVID-19. Most of its restaurants were forced to close due to state governmental orders restricting indoor dining at restaurants. Prior to the pandemic, the restaurants operated almost exclusively on in-person dining. Even though the restaurants were permitted to provide take-out services, the restaurants found little success doing so. Eventually the group sought to invoke the business interruption provision of its commercial insurance policy with Zurich. 

Zurich argued that the restaurants’ economic losses were not covered by the policy because they were not caused by “physical loss or damage to property.” Zurich also argued that, even if there had been direct physical loss, the policy’s microorganism exclusion would exclude coverage. Although the insurer cited to a litany of other court decisions rejecting similar claims for business interruption coverage, the Court parsed the specific language of the restaurants’ policy and found that the restaurant’s loss of income was a covered loss and the microorganism exclusion did not apply because the loss was not caused by COVID-19 itself but rather was caused by the government mandated closures in response to COVID-19.

The decision demonstrates that whether a policyholder can successfully enforce insurance coverage is influenced by the specific policy language at issue and the facts giving rise to a “loss.” The analysis likely will vary from jurisdiction to jurisdiction, but this case may be a small harbinger of hope to businesses that are scrambling to find any way to stay afloat during these difficult times. 

The attorneys at Chilivis Grubman handle business litigation on a variety of issues in courts throughout the United States.  Please contact us today regarding your litigation needs.