COVID-19 Coverage Litigation: Insurers Maintain Unmatched Record in All Court of Appeal Decisions to Date | Hinshaw & Culbertson – Information for Insurers

As we approach the end of the first quarter of 2022, things are still looking good for insurers in the battle of COVID-19 coverage litigation.

The issuance of various government orders requiring companies to modify or temporarily close their operations led to an almost immediate avalanche of claims and lawsuits involving first party commercial property insurance policies. Pandemic-related lawsuits have also implicated other policies.

A growing number of cases

There has been a slight increase in the number of new cases recently, as the contractual two-year statute of limitations for bringing a claim under many first-party policies approaches. According to the University of Pennsylvania Carey School of Law Covid Coverage Litigation Tracker, at the end of February 2022, there were approximately 2,227 COVID-19 coverage cases filed, of which 1,974 involved business interruption, 1,779 involved additional expense, 1,699 involving civil authority, 220 involving entry/exit, 115 involving contamination, 92 involving event cancellation, 87 involving prosecution and labor, 16 involving liability, and 219 involving other Questions. About 469 cases have been filed as putative class actions and 768 cases include allegations of bad faith.[1]

Insurers rack up victories in majority of decisions on motions to dismiss and motions for summary judgment

At the trial court level, insurers prevailed in more than 78 percent of 194 decisions on motions to dismiss in state courts and more than 95 percent of 598 federal court decisions. These victories were achieved primarily on the basis that the virus claims do not involve “direct physical loss or damage” to property as required by most US policy terms, government orders do not constitute a loss ownership and/or virus exclusions exclude coverage.[2] Insurers prevailed in approximately 52 summary judgment decisions (with partial summary judgment granted in 10 other cases) while policyholders prevailed in only 11. Insurers also prevailed in the first bench trial and in the first trial before COVID-19 jury.[3] Policyholders have voluntarily dismissed many lawsuits and many other cases remain unresolved.

Insurers remain unbeaten at the Court of Appeals, but many appeals are pending

The insurers have won, on the merits, in every appellate court decision to date in federal and state courts.

At the appellate court level, insurers prevailed in the first 28 decisions of the U.S. Circuit Courts of Appeal, the Second, Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, and Eleventh Circuits ruling for insurers under laws of several states.[4] These courts ruled in favor of the insurers based on the absence of “direct physical loss or damage” as well as the virus, microorganism, loss of use, and ordinance or statute exclusions.

The first seven state appellate court rulings, one in California, one in Indiana, one in Michigan, two in Ohio and two in Illinois also favored insurers in the battle for COVID-19 coverage.[5]

There is still a long way to go and many appeals are still pending. There are approximately 240 appeals pending in federal court (81 of them in the Ninth Circuit alone), another 91 in state court, and future appeals are also expected.

[1] To see Follow-up of Covid coverage disputesUniversity of Pennsylvania Carey Law School (last visited March 23, 2022).

[2] ID.

[3] ID.

[4] See 10012 Holdings Inc. c. Sentinel Ins. Co.Ltd., No. 21-80-cv, 2021 US App. LEXIS 38270 (2nd Cir. Dec. 27, 2021); Kim-Chee LLC v. Philadelphia Indemnity Ins. Co., no. 21-1082-cv, 2022 US App. LEXIS 2655 (2nd Cir. January 28, 2022); SA Hospitality Group, LLC against Hartford Fire Insurance Co.., no. 21-1523-cv, 2022 US App. LEXIS 7139 (2nd Cir. Mar. 18, 2022); Uncork and Build vs. Cincinnati Insurance Co., no. 21-1311, 2022 US App. LEXIS 5935 (4th Cir. March 7, 2022); Q Clothier New Orleans LLC and. al v Twin City Fire Insurance Co. No. 21-30278, 2022 US App. LEXIS 7565 (5th Cir. March 22, 2022); Barbecue by Terry Black, LLC vs. State Auto Mut. Ins. Co., no. 21-50078, 2022 US App. LEXIS 287 (5th Cir. January 5, 2022); Aggie Investments, LLC v Continental Cas. Co., No. 21-40382, 2022 US App. LEXIS 393 (5th Cir. January 6, 2022); System Optics, Inc. v. Twin City Fire Insurance Co.., no. 21-3556, 2022 US App. LEXIS 5731 (6th Cir. March 2, 2022); Bridal Expressions LLC c. Owners Ins. Co., no. 21-3381, 2021 US App. LEXIS 35676 (6th Cir. 30 Nov. 2021); The Brown Jug, Inc. v Cincinnati Insurance Co., No. 21-2644/21-2715/21-2718, 2022 US App. LEXIS 4836 (6th Cir. 23 Feb. 2022); Estes vs. Cincinnati Ins. Co., no. 21-5587, 2022 US App. LEXIS 926 (6th Cir. 12/01/2022); Dakota Girls, LLC v. Philadelphia Indemnity Ins. Co., no. 21-3245, 2021 US App. LEXIS 33002 (6th Cir. Nov. 5, 2021); In Re Zurich Am. Ins. Co., no. 21-0302, 2021 US App. LEXIS 29440 (6th Cir. Sept. 29, 2021); Santo’s Italian Cafe LLC v. Acuity Ins. Co., no. 21-3068, 2021 US App. LEXIS 28720 (6th Cir. Sept. 22, 2021); Sandy Point Dental, PC v. Cin. insurance company, no. 21-1186, no. 21-1559, no. 21-1203, 2021 US App. LEXIS 36399 (7th Cir. Dec. 9, 2021); Bradley Hotel Corp. vs. Aspen Specialty Ins. Co., no. 21-1173, 2021 US App. LEXIS 36398 (7th Cir. Dec. 9, 2021); Mashallah, Inc. vs. W. Bend Mut. Ins. Co., no. 21-1507, 2021 US App. LEXIS 36400 (7th Cir. Dec. 9, 2021); Crescent Plaza Hotel Owner, LP c. Zurich Am. Ins. Co., no. 21-1316, 2021 US App. LEXIS 36396 (7th Cir. Dec. 9, 2021); Bauer v AGA Service Co., no. 20-3711, 2022 US App. LEXIS 3518 (8th Cir. 9 Feb. 2022); Oral Surgeons, PC v. Cincinnati Ins. Co., no. 20-3211, 2021 US App. LEXIS 19775 (8th Cir. July 2, 2021); Baker v. Oregon Mutual Insurance Co., no. 21-15716, 2022 US App. LEXIS 6769 (9th Cir. Mar. 16, 2022); Levy Ad Grp., Inc. v. Fed. Ins. Co., no. 21-15413, 2022 US App. LEXIS 6954 (9th Cir. Mar. 17, 2022); Mudpie, Inc. c. Travelers Case. Ins. Co., no. 20-16858, 2021 US App. LEXIS 29624 (9th Cir. 1 Oct. 2021); Selane Prods. v. Cont’l Case. Co., no. 21-55123, 2021 US App. LEXIS 29633 (9th Cir. 1 Oct. 2021); Chattanooga Prof’l Baseball LLC vs. Nat’l Cas. Co., no. 20-17422, 2021 US App. LEXIS 29632 (9th Cir. 1 Oct. 2021); Goodwill Indus. of Cent. Okla., Inc. vs. Phila. Indem. Ins. Co., no. 21-6045, 2021 US App. LEXIS 37802 (10th Cir. Dec. 21, 2021); Gilreath Family & Cosmetic Dentistry, Inc. v Cincinnati Insurance Co., no. 21-11046, 2021 US App. LEXIS 26196 (11th Cir. Aug. 31, 2021); Ascent Hospitality Management Co. LLC v. Employers Ins. Wausau County, no. 21-11924, 2022 US App. LEXIS 1161 (11th Cir. January 14, 2022).

[5] To see Inns-by-the-Sea c. Cal. Mut. Ins. Co., 286 cal. Rptr. 3d 576 (Ct. App. 2021); Sanzo enter., LLC c. Erie Ins. Scale2021-Ohio-4268 (Ct. App.); Nail Nook, Inc. vs. Hiscox Ins. Co.2021-Ohio-4211 (App. Ct.); Ind. Repertory Theater c. Cincinnati Case. Co.180 NE3d 403, 404 (Ind. Ct. App. 2022); Gavrilides Mgmt. Co., LLC v. Mich. Ins. Co., No. 354418, 2022 Michigan App. LEXIS 632 (Ct. App. Feb. 1, 2022); Sweet Berry Café, Inc. v Soc’y Ins., Inc.., 2022 IL App (2d) 210088; Lee v. State Farm Fire & Case. Co., 2022 IT App (1st) 210105.

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