Description

In early July 2020, the Insurance Journal reports, there was a decision from a trial court in Michigan rejecting a restaurant’s claim under a business interruption policy.  The court’s ruling finds no “property damage” as most BI policies define the phrase and notes that even if the insured could overcome this hurdle, the claim would still be denied under the virus exclusion in the policy.  Industry insiders say it is a sign of things to come; more favorable rulings for carriers are anticipated.

This hour-long seminar begins with a brief foray into the standard industry forms on business income to set the stage for a discussion of the Michigan decision and others like it.  

The class then moves to the errors and omissions implications of these coverage decisions.  This portion focuses on Casa Colina, Inc. v. Hartford Fire Insurance Company, a federal decision from California. The facts are fairly simple.  Casa Colina provides multiple healthcare services in southern California, such as diagnostic work, rehabilitation, and surgery. Casa Colina was insured by Hartford for business interruption. After the pandemic hit, Casa Colina filed a claim with Hartford, which was denied.  Litigation followed. Casa Colina sued Hartford and also sued the agency involved.  Though the case was complicated procedurally, one thing was clear: Casa Colina’s complaint against the agency was one of simple negligence.

Casa Colina’s arguments and allegations are significant because they are ones that likely would be duplicated in any errors and omissions lawsuit involving the lack of coverage for pandemic-related losses. Casa Colina made three of them. Casa Colina said that the agency: (1) failed to obtain the coverage which it had requested; (2) failed to identify exactly what coverage it did in fact obtain; and, (3) failed to advise or warn Casa Colina of limitations in its coverage, or possible gaps.

The federal court in California ruled in favor of the agency.  The case is illustrative of what industry experts have noted in general: a huge gap between what leadership of various corporate entities thinks is covered and what is actually covered.  That, plus the fact that there are multiple industries that could be impacted by adverse business interruption coverage claims, leads to the conclusion that agent E&O litigation could be headline-grabbing in 2021.

The seminar concludes with a discussion of multiple other issues connected to Covid-19, including a discussion of some employment related matters such as workers compensation and EPLI.  Part of the discussion here is whether a vaccine can be mandated by the employer.  The reason to discuss this is evident – it impacts EPLI exposure significantly.