Unusual policy language allows NY Botanical Garden’s COVID claim to continue
A New York appeals court on Tuesday handed a rare insured victory to the New York Botanical Garden for revenue lost during COVID-19 closures, noting that the wording of the disputed policy did not require physical harm.
The Botanical Garden, a well-known tourist attraction that covers 250 acres in the Bronx, argued that it had purchased broader coverage than the usual commercial property policy provides. The “General Pollution Liability Policy” she purchased from Allied World Assurance Co. did not require direct physical loss or damage as a condition of coverage.
The First Department of the Appellate Division upheld a Bronx County Supreme Court decision that denied Allied World’s motions to dismiss the garden’s breach of contract and bad faith claims against the insurer.
“The cases relied upon by the defendant, which involve civil authority coverage in liability policies and periods of complete denial of access due to physical damage, are inappropriate,” the panel’s opinion reads. “Nor has the Defendant established that the orders denying access were not solely and directly the result of a pollutant in an ‘independent location’, as that term of the policy is understood.”
The majority of state and federal appeals courts that have heard COVID-related business interruption lawsuits so far have ruled that no coverage was due because there was no loss or of physical damage. But the Gardens purchased an unusual policy that did not include standard language for damages caused by orders from civil authorities.
Tom Baker, a law professor at the University of Pennsylvania who runs a well-known COVID-19 litigation tracker, said his team is not aware of any other cases involving the same police form as the police purchased by the Botanical Garden.
Allied World has acknowledged that COVID-19 is a “pollution incident” under the policy, but argued that the botanical garden must lose full access to its property as a condition of coverage.
The insurer also clarified that the pollution triggering the claim must be at an “independent location” under one of the policy endorsements. Allied World argued that New York State had issued executive orders restricting access to businesses for “prophylactic reasons” to slow the spread of the virus. There was not one specific independent location that affected the property of the Botanical Garden.
Bronx County Judge Eddie J. McShan rejected those arguments, as did the Appeals Division. In an order dated Oct. 15, 2021, McShan found that the policy had a broad definition of “independent location” with no “radius clause” that would bar the Botanical Garden’s claim.
“Furthermore, there is no language requiring physical damage to plaintiffs’ property,” McShan’s order states.
Tred R. Eyerly, a lawyer from Honolulu, Hawaii, who blogged about the Botanical Garden’s victory at the trial court level, said he was happy to see an appeals court rule in favor of an insured with a COVID-related business interruption claim. He did, however, acknowledge that the New York affair involved “unusual political language”.
Eyerly said he had never encountered the language of civil authorities in Allied World politics in Hawaii.
“I would be surprised if they could anticipate a pandemic, but it worked well for them,” he said.
No decision has been made on the merits of the Botanical Garden’s claim. The decision allows the case to go to trial.
Courts of Appeals in California, Iowa, Wisconsin, Illinois, Indiana, Ohio, New York, Massachusetts, Maryland and Florida have ruled against the policyholders seeking to cover lost revenue due to COVID shutdowns, as are the 11 regional appeals courts.
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