Business closures and restricted operations during the coronavirus pandemic have played havoc with bottom lines, spurring business owners to look to their business-interruption insurance policies to make up the losses. However, many insurers have denied coverage, citing various exclusionary clauses in policies. In Pennsylvania, this has prompted a bevy of appeals that so far have not resulted in a clear determination of law concerning coverage for COVID-19-related business losses.
Business-interruption coverage normally applies when an enterprise has suffered direct damage to its physical plant, such as from a fire, flood or natural disaster. Policies may also cover closures by order of government authorities due to such events as civil unrest or violent storms, though usually this requires demonstrating that physical damage occurred in the surrounding area. COVID-19-related closures do not precisely fit such circumstances, which has led many claims to be rejected.
In response to claim denials, one frustrated business owner sought the help of the Pennsylvania Supreme Court to resolve the coverage issue in a streamlined fashion. In Joseph Tambellini, Inc. v. Erie Insurance Exchange, the insured business requested that the Court exercise its “King’s Bench powers,” under which it may take up cases of public importance on its own volition to avoid the possibly deleterious effects of waiting for the normal appeals process to play itself out.
The plaintiff, in its emergency application for judicial relief, asked the Court to establish a system for the handling all of COVID-19 business loss insurance cases by a single court or a small number of judges, so that such claims could be decided quickly and uniformly. The defendant insurance company opposed the application, as did two insurance company associations that intervened in the proceeding. They argued that the relevant policy language and facts of each case are too distinct to make an expedited procedure useful or effective. Rather, they argued, these decisions needed to be addressed on a case-by-case basis using normal avenues of litigation. The state Supreme Court denied the request without an opinion on May 14, leaving the issue of business-interruption coverage for COVID-19-related losses in a state of turmoil.
If you are a business owner who has purchased the necessary insurance to cover business-interruption losses, it’s important to have a business and commercial litigation attorney review the language of your policy and the nature of your losses in order to evaluate your claim options. If you’ve been denied coverage, a declaratory judgment action may be filed, asking the court to decide the insurance issues.