Two years after lockdowns went into effect to stop the spread of COVID-19, lawsuits are mounting in favor of insurers who were sued for denying their claims.
A federal judge in California on Wednesday dismissed Creative Artists Agency’s lawsuit against Affiliated FM Insurance for refusing to cover losses due to virus-forced business closures. Following precedent, US District Judge Andre Birotte Jr. found that the principles of “loss or direct damage” were not related to principles related to epidemics.
After local governments began ordering stay-at-home orders in 2020, claims worth billions of dollars — many from the entertainment and live events industry — poured in across the country. But instead of paying, insurers looked at the fine print and denied more. The companies collectively found that business interruption policies for financial losses do not include coverage for epidemics, saying that loss or damage to property is necessary. A legal battle has begun: More than 2,300 cases against the elections have been filed, according to follower of insurance claims for COVID-19 created by Penn Law professor Tom Baker. About 92 percent, or 792 of the 862 cases considered for dismissal, were dismissed.
The future of the CAA case, like others, has changed if there is a “loss of body” to the insurance products. The company said its losses were “directly attributable to losses and damages” based on government shutdown laws. The presence of the virus in the air and on the ground, it said, made the site unfit for use.
Birotte rejected the argument, finding that the CAA had failed to identify in detail how the virus particles had caused the “transformation” of its buildings. “For example, some outside force may have acted on the insured property to change the condition of the property,” he wrote.
In Inns of the Sea v. California Mutual Insurance Co., the first case in a California appeals court involving a dispute over COVID-19, found that Inns also failed to identify physical damage that led to the shutdown even though the virus was said to be on its premises.
United Talent Agency’s suit against its insurer, Vigilant Insurance, ended the same way. “In the wake of the COVID-19 pandemic, many insurers have filed claims against UTA, and many courts have rejected them,” said an April ruling from a state appeals court affirming that the case was dismissed. “It is now recognized that short-term housing loss due to pandemic-related foreclosures, in the absence of other factors, does not constitute actual loss or damage.”
The judge also denied that there are issues in the CAA’s policy that deal with business damages caused by state law. The regulations were issued to prevent the spread of COVID-19, Birotte found, not because of property damage.
Regardless, the CAA had a provision in its policy not to include “any cost for pollution including the inability to use or occupy a site or any cost to make a site safe or suitable for use or habitation.”
The CAA cannot dispute that government shutdown orders were issued in response to COVID-19 and that the virus is “the cause of the spill,” Birotte found. “Several courts in this state have held that a similar Contamination Exclusion applies even if plaintiffs can show ‘loss or damage’ to their property,” it said.
The agency was not given an opportunity to amend its statement because it did not specify what it would include in the revision of the case, “especially considering the circumstances that compel them to deny their claims.”
There have been 73 lawsuits filed by arts and sports companies, according to the COVID-19 insurance tracker.
CAA declined to comment. Associates and his attorneys did not respond to requests for comment.