Last week, a New Orleans restaurant filed what is believed to be the first lawsuit in the United States seeking insurance to cover losses from government-mandated closures due to the Coronavirus pandemic. As with many other claims, the primary dispute turns on the coverage provided under the “civil authority” provision. That coverage, in turn, may hinge on still developing science on how long the virus can remain in properties.
Oceana Grill argued in its complaint that the civil authority prong of its “all risk” property policy with Lloyd’s of London should cover its lost revenue after Louisiana issued a statewide order that sharply limited the size of public gatherings and required restaurants to stop on-site dining. This scenario has played out all across the country, especially in the past two weeks, as federal, state, and local orders have issued restricting the size of public gatherings and shuttering countless businesses. Many business are expected to grapple with the issue in the coming days, weeks, and months.
Like many civil authority provisions, the Lloyd’s of London policy requires that a government restriction stem from a “direct physical loss” — or damage — to a nearby property for coverage to apply. The restaurant appears to contend that this requirement was met when Louisiana’s governor and New Orleans’ mayor outlined their concerns that the Coronavirus could contaminate and damage public spaces.
The civil authority provision in many “all risk” policies requires that there be an actual direct physical loss. This loss requirement is unresolved, as the unsettled science around the Coronavirus evolves on a near daily basis. There is no consensus in the scientific community regarding how long the Coronavirus can survive on surfaces or materials. One study issued by the New England Journal of Medicine indicated it can survive on cardboard for up to a day and on plastic and stainless steel for up to 72 hours.
As policyholders and insurance companies get more involved in litigation over civil authority coverage disputes, they may well turn on factors currently unknown. Parties are likely to turn to scientific experts to determine if, and how long, the Coronavirus contaminated buildings. This may be influenced by the virus’s lifespan on a surface, as well as the risk of future re-contamination. In other words, re-contamination might constitute a continually renewing physical loss. Others may contend that the loss of functionality of a building is sufficient to constitute physical loss.
In the upcoming days, weeks, and years, businesses and individuals may suffer many billions of dollars in damages – some of which may be recoverable in court. Berg Plummer Johnson & Raval, LLP is available to assist you with business interruption claims with your insurers. To help to determine how to address your business interruption insurance claim and whether your coronavirus claim is actionable, call us at (713) 526-0200 or contact us online.