Insurance companies learned during SARS and other virus outbreaks that such things could be overwhelming, so they did what insurance companies always do, they excluded virus outbreaks from business interruption policies. While some did so explicitly, other insurance companies only offered coverage against “physical damage” that rendered a business inoperable.
With hundreds of thousands of businesses shut down because of the virus, insurance companies are fielding calls left and right where they have to tell the business owners that they’re not covered. The pandemic didn’t cause physical damage, the businesses can still function, they just aren’t allowed to.
When sued over not paying claims, insurance companies have won in Michigan and the District of Columbia. But now a judge has sided with the business owners in Missouri.
The decision against Cincinnati Insurance Co by U.S. District Judge Stephen Bough in Kansas City appears to be the first victory for policyholders under such claims, but it’s a narrow victory.
The judged didn’t rule that the insurance companies must pay, he only ruled that the policyholders, the businesses, have enough of a case that it shouldn’t be dismissed out of hand.
The judge found the plaintiffs’ argument, that the virus exists as particles on surfaces in their businesses, and therefore represents physical damage, compelling enough to let the case go forward.
The insurance companies say that if such claims are allowed they will be bankrupt, but that doesn’t seem like the right metric. If they offered insurance against something, they should pay if that something happens. But claiming that the virus is “physical” and represents property damage, that seems to stretch the common understanding of the terms.
Besides, can they prove that the virus is on their restaurant property? Or is the state shutting them down as a precaution? And the virus can’t live for more than three days on a surface, so even if it was present at some point, after a few days of the location being closed, it was gone.
It’s easy to see why the business owners want to sue for payment, but it doesn’t look like they have much of a case.