Business interruption insurance has become a focal point for litigation, particularly in the wake of the COVID-19 pandemic. Businesses across Pennsylvania have faced unprecedented disruptions, leading to a surge in claims under business interruption policies. At Leeson & Leeson our Bethlehem, Pennsylvania, corporate and business attorneys understand these recent developments and how it is crucial for businesses to navigate this complex landscape.
The Impact of COVID-19 on Business Interruption Claims
The COVID-19 pandemic has led to a significant increase in business interruption insurance claims as businesses sought compensation for losses incurred due to government-mandated shutdowns and restrictions. Many insurance companies have denied these claims, arguing that business interruption policies typically cover physical damage to property, which they claim the virus does not cause.
This widespread denial of claims has resulted in numerous lawsuits across Pennsylvania and the United States. Businesses argue that the presence of the virus on surfaces and in the air constitutes physical damage and should trigger coverage under their policies. The outcome of these lawsuits could have far-reaching implications for policyholders and insurers alike.
Key Court Decisions in Pennsylvania
Several court decisions in Pennsylvania have set important precedents for business interruption insurance litigation. Notably, the Pennsylvania Supreme Court and lower courts have begun to address the critical issue of whether COVID-19 constitutes “physical loss or damage” under business interruption policies.
One significant case is Friends of DeVito v. Wolf, where the Pennsylvania Supreme Court upheld Governor Wolf’s shutdown orders, recognizing the serious and immediate danger posed by COVID-19. Although this case did not directly address insurance claims, it underscored the severity of the pandemic’s impact, influencing subsequent business interruption claims.
In Taps & Bourbon on Terrace, LLC v. Underwriters at Lloyd’s London, the Philadelphia Court of Common Pleas ruled in favor of the insurer, finding that COVID-19 did not cause physical damage to the property, thus denying the business interruption claim. This decision aligns with many others across the country, where courts have ruled that economic losses from the pandemic do not constitute physical damage.
However, there are contrasting decisions, such as in Gregory Packaging, Inc. v. Travelers Property Casualty Company of America, where the court found that the release of ammonia, rendering a building temporarily uninhabitable, constituted physical damage. While not a COVID-19 case, it provides a basis for arguing that contamination can trigger business interruption coverage.
Legislative and Regulatory Responses
In response to the pandemic and the resulting litigation, there have been calls for legislative and regulatory changes. Some Pennsylvania lawmakers have proposed bills that would mandate coverage for business interruption losses due to COVID-19, regardless of policy language. While these proposals face significant opposition from the insurance industry, they reflect a growing recognition of the need for clearer guidelines and protections for businesses.
Best Practices for Businesses
Given the evolving legal landscape, businesses in Pennsylvania should take proactive steps to protect their interests:
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- Review Insurance Policies: Understand the specific terms and exclusions in your business interruption insurance policies. Look for language regarding physical damage, virus exclusions, and civil authority coverage.
- Document Losses: Keep detailed records of all financial losses and disruptions caused by the pandemic. This documentation will be crucial in supporting any claims or litigation.
- Seek Legal Advice: Consult with experienced attorneys who specialize in insurance litigation. Legal experts can help interpret policy language, advise on the likelihood of successful claims, and represent your interests in court if necessary.
- Stay Informed: Keep abreast of ongoing legal developments and legislative changes that could impact business interruption claims. This knowledge will enable you to respond quickly to new opportunities or challenges.
Schedule a Consultation Today
At Leeson & Leeson, our Bethlehem Business Law Lawyers are committed to helping businesses understand their rights and options under business interruption insurance policies. Contact us today for a consultation, and let us help you navigate these turbulent times.