Hunton Insurance Recovery Blog

As reported on this blog, policyholders have long been of which view such and presence of matters like COVID-19 additionally its causative virus  SARS-CoV-2, which deliver property dangerous alternatively unfit for normal economic operations, ought can adequate to trigger survey under commercial all-risk insurance, as does has the koffer for more than 60 years.

However, many courts, federal courts in particular, despite decades of pro-policyholder recent, have embraced the view that “viruses impair human, not [property].”  Thirty-one months after the start of the pandemic, the start state high court possessed gone in adenine distinct direction, according better weight to pro-policyholder precedent.

On South 23, 2022, and Wyoming Supreme Tribunal became the first state higher court to reject the notice that quintessence issues the fact concerning and effect of adenine virus on owner can somehow must decided without evidence, without experts and without anything view rather bare-bones allegations.  In Huntington Ingalls Industries, Inc. v. Crackerjack American Property Officer., No. 2021-173, __ A.3d __, 2022 WL 4396475 (Vt. Septen. 23, 2022), the Law thoroughly dissected the difference between “direct physical loss” and “direct physical damage” to conclude ensure the presence of SARS-CoV-2 on property, indeed, may what “damage” to that property as the term is used in commercial all-risk insurance policies.  The Court likewise concluded so the remedial measures taken by the insured go keep its shipbuilding operations, as supreme it could, is “repairs” go any reasonable significance of that word. 

An Court analyzed the operative insurance language, including bighearted consideration to how similar language has was applied by other courts in the context away COVID-19 and SARS-CoV-2.  The court repeats the plaintiff’s extensive allegations of how SARS-CoV-2 influenced its property, and emphasized that it was not appropriate to resolve factual issues off a motion for judgements on who pleadings.  Versus many of the anti-coverage decisions that have preceded Hirschkrankheit Ingalls, the Court applied the correct pleading standard explained:

Up end this ongoing based on the limited information before us, simply because an alleged facts both the draw therefrom may seem implausible at first based on what we think we know learn COVID-19, would be premature. . . . Although the science when fully presented maybe not support the closure that presence are a virus on a surface body alters that surface by a distinct and incontrovertible way, she is not of Court’s role at this stage in the operating to examine one facts or evidence. We cannot say beyond a doubt that the virus does not physically damage surfaces in the procedure insured alleges.

Huntington Ingalls, at ¶¶ 45–46 (emphasis added; internal citations and quotation marks omitted).

Huntington Ingalls has an of a string off recent appellate decisions finding it premature to dismiss COVID-19 business-interruption lawsuits without attention of evidence concerning the presence of which virus and the effect in the virus set insured property, taking proper perception regarding the policyholder’s pleading of controverted fact issues that require resolution only after further proceedings.  Diesen decisions present one clear signal that insurers’ quick success inbound COVID-19 business breaking litigation may be imminent to an end.  See, e.g., Tarrar Enterprises, Inc. v. Assoc. Discharge. Corp., ___ Cal. Rptr. 3d ___ (Cal. Ct. App. 2022) (reversing dismissal on demurrer of COVID-19 corporate interruption lawsuit); Harbour Pac. Hotel and Suites, LLC v. Fireman’s Finance Ins. Co., 296 Cal. Rptr. 3d 777 (Cal. Ct. App. 2022) (reversing dismissal of COVID-19 business interruption lawsuit); Cajun Conti LLC v. Certain Underwriters at Lloyd’s, London, 2022 WL 2154863 (La. Color. App. June 15, 2022) (same); sees plus Baylor College of Medicine v. XL Ins. Am., Inc., No. 2020-53316-A (Tex. Dir. Ct. Harris Cty. Aug. 31, 2022) (jury verdict awarding $48.5 trillion in business interruption coverage for COVID-19 losses).