Business Interruption Insurance Case – Lansdale 329 Prop LLC et al v The Hartford Ins
DECISION: A Pennsylvania Federal Court just dismissed a lawsuit brought by a group of restaurateurs (this is the correct spelling) seeking to force The Hartford Insurance Co. to provide business interruption insurance coverage related to COVID-19 and government closure orders. The Court dismissed the lawsuit this week. In dismissing the lawsuit, the Court concluded that the key policy language provided coverage for business interruption losses that arise from a “physical” loss or damage or a “physical” impact that makes the building unusable or uninhabitable. However, the Court concluded that the government ‘closure orders’ had no “physical impact” on the restaurateurs’ buildings or premises. The Court further concluded that the “threat” of COVID-19 is not a “physical loss or damage”. As a result of those conclusions, the Court ruled the policies do not require The Hartford Insurance Cos. to provide business interruption coverage due to COVID-19 government closure orders or the threat of COVID-19 that caused or may have caused some restaurants and bars to cease operations.
KEY TAKEAWAY: Government closure orders or the threat (alone) of COVID-19 that cause a business to close are not likely to require business interruption insurance coverage (though this is heavily dependent on the precise policy language). Notably though, in this case the Court focused on the restaurateurs’ admission that none of their establishments suffered from an actual presence of COVID-19 in their businesses. The Court distinguished the restaurateurs’ claims from the claims in other cases where an actual presence of COVID-19 particles was alleged or were present. Here, the restaurateurs claims were based on the government closure orders and the “THREAT” of COVID-19 that forced them to close their businesses. They did not make any claim of an actual presence of COVID-19 in their establishments and, in fact, the Court noted the businesses continued to operate with take-out and delivery. This is a key distinction since there are cases that have found a ‘physical loss or damage’ due to something as intangible as carbon monoxide, loss of electricity, ammonia gases, and smoke from a nearby fire. Similarly, other cases have not been dismissed where the restaurateurs or business owners alleged that COVID-19 was actually present in their establishments and was a direct cause of their business’ closure. This decision is certainly one more ruling (of many piling up) against business owners seeking insurance coverage for losses due to COVID-19 or government closure orders, but these early decisions are giving business owners a roadmap for what is important to sustaining a claim for business interruption insurance coverage.
The Memorandum of Decision can be found here: Lansdale 329 Prop LLC v The Hartford Ins 4-2021
If your business has experienced losses due to an actual presence of COVID-19 (often due to a positive test or close contact of an employee), please contact one of our business lawyers at The Jacobs Law LLC for a consultation at 1-800-652-4783 or email us at ContactUs@TheJacobsLaw.com.
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