Travelers Strikes Back: Files COVID-19 Coverage Action
April 22, 2020
By: Bryan M. Weiss
As expected, lawsuits against property insurers by businesses seeking benefits for their business losses caused by the COVID-19 pandemic and the governmental orders associated with the outbreak are mounting by the day. There are over 25 such lawsuits presently pending in state and federal courts nationwide by restaurants, theaters, clubs and other businesses impacted by the shutdown orders and the resulting loss of income. This past Monday, a Philadelphia law firm filed a petition with the U.S. Judicial Panel on Multidistrict Litigation on Monday requesting that all federal cases seeking coverage for COVID-19 business interruption losses be transferred to the U.S. District Court for the Eastern District of Pennsylvania and consolidated before Judge Timothy Savage, who is already presiding over some of these coverage actions. They argue that MDL consolidation is appropriate because “the fact that the Actions do, and the tag-along actions will, involve different, geographically dispersed defendants with slightly different policy language in disparate industries does not preclude consolidation or coordination here because the central issue - whether business closures resulting from government orders triggers coverage under business interruption policies - will be the same across all cases.”
Adding to that slate of lawsuits is a looming battle between Los Angeles' so-called "celebrity attorney" Mark Geragos and Travelers Insurance Company. Geragos recently filed five suits against Travelers in Los Angeles, seeking business interruption coverage related to the coronavirus pandemic. Well on April 20, 2020, Travelers struck back, filing its own declaratory relief action against Geragos in the United States District Court for the Central District of California, case no. 2:20-cv-03619. Travelers argues that its policies, like most property policies at issue in these suits, require “direct physical loss or damage” to property, and the presence or suspected presence of a virus does not constitute the requisite “direct physical loss or damage.” In addition, Travelers points out that its policies contain an endorsement entitled “EXCLUSION OF LOSS DUE TO VIRUS OR BACTERIA,” which excludes coverage for “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease,” which applies to “forms or endorsements that cover business income, extra expense, rental value or action of civil authority.” In its pleading, Travelers recognizes that the pandemic "has affected the public and the vast majority of businesses throughout the country (and world) in unprecedented ways. But these challenging and unfortunate circumstances do not create insurance coverage for losses that fall outside the terms of a policyholder’s insurance contract." (emphasis added.)
This appears to be the first instance of an insurance company filing an action against its insured to adjudicate the coverage issues presented by these COVID-19 claims and is one to watch.
If you have any questions regarding these issues or seek guidance with respect to COVID-19 related matters, feel free to contact me at firstname.lastname@example.org. Our office remains fully operational to meet the needs of our clients during this unique time.
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