This Just In ...
COVID Business Interruption Update: A win for producers of the Tina Turner Musical and a loss for 2000+ small businesses.
The Tina Turner Musical producers purchased an event insurance policy from Chubb Insurance Company that had a communicable disease exclusion. It excluded losses from communicable diseases that were “of such a systemic nature as to lead to quarantine or travel advisory orders by a national or international body or agency,”
However, since the show’s losses “stemmed from Executive Orders issued by the New York State Governor and New York City Mayor banning performances and gatherings in theaters, the exclusion did not apply,” said the New York state appeals court. “Plaintiff’s claim for consequential damages is adequately pleaded.”
A class action of more than 2,000 businesses sued Erie Insurance in October for business interruption coverage because of closures due to COVID. Their suit said that since their businesses had all risk policies, there should be “coverage for all risks of direct physical loss or damages unless the risk is explicitly excluded or limited.” Thus, “When the mandated shutdown rules made it unlawful for plaintiffs to fully access, use and operate their businesses at the covered property, (it) constitutes a loss to the covered property under the policy.”
However, Erie responded “that the mandated shutdown rules did not cause direct physical loss of or damage to property because they did not physically alter plaintiff’s properties, nor did they render those properties useless or uninhabitable.”
Chief U.S. District Judge Mark Hornak agreed with Erie: “It is self-evident that the COVID-19 pandemic has had detrimental consequences to people all over the world,” the judge wrote. “However, it can also be accurate that the Erie policies...do not provide coverage for the additional consequences that plaintiffs assert.”
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