In the continued legal battle over whether business interruption insurance policies cover business losses due to the COVID-19 pandemic, a recent case in the United States District Court for the District of Connecticut (the “Connecticut District Court”) adds to the debate. Generally, business interruption insurance covers losses resulting from the closure of the property due to some physical damage or loss to the business premises. In terms of losses incurred from the COVID-19 pandemic, policyholders have argued that the revenue lost from the closure of their businesses is covered by the business interruption insurance. However, insurers have argued that exclusions such as a Virus Exclusion provision prevent any claims resulting from the COVID-19 pandemic. The recent case in the Connecticut District Court provides a great illustration of this ongoing fight for coverage between the insurance industry and business.
In the case One40 Beauty Lounge LLC v. Sentinel Ins. Co., No. 3:20-cv-00643 (KAD), 2021 U.S. Dist. LEXIS 216320 (D. Conn. Nov. 9, 2021), One40 Beauty Lounge, LLC (“One40”) filed a class action against Sentinel Insurance Company (“Sentinel”), claiming the losses it sustained from closing its business due to the COVID-19 pandemic were covered by its insurance policy (the “Policy”) with Sentinel.[1] Sentinel moved for judgment on the pleadings on the ground the Virus Exclusion provision of the Policy unambiguously excluded coverage of any losses resulting from the COVID-19 pandemic.[2] Judge Kari Dooley acknowledged that she was not examining the issue of whether the Virus Exclusion provision prevented One40 from making a claim under the Policy in a vacuum because other courts had previously examined identical provisions and found it to be unambiguous.[3]
One40 argued that even if the Virus Exclusion provision prevented coverage, a subsection of the Virus Exclusion provision allowed limited coverage for 30 days of losses.[4] However, Judge Dooley stated that the subsections of the Virus Exclusion provision must be read together.[5] When viewed as a whole, the subsection One40 relied upon did not provide One40 with limited coverage for 30 days.[6] Since the Virus Exclusion provision unambiguously applied to prevent coverage for losses resulting from the COVID-19 pandemic, Judge Dooley granted Sentinel’s motion for judgment on the pleadings.
While the Connecticut District Court ruled that Virus Exclusion provisions prevent coverage for losses from the COVID-19 pandemic, coverage of business losses from the pandemic is still an open issue. As the COVID-19 pandemic continues to ebb and flow and impacts daily business procedures, policyholders will most likely continue to seek coverage for lost revenue resulting from the closure of their businesses.
[1]One40 Beauty Lounge LLC v. Sentinel Ins. Co., No. 3:20-cv-00643 (KAD), 2021 U.S. Dist. LEXIS 216320 (D. Conn. Nov. 9, 2021).
[2]Id. at *1.
[3]Id. at *7.
[4]Id. at *8.
[5]Id. at *11.
[6]Id.
[7]Id. at *12.