A case example of the legal action being undertaken by US policyholders arising from the COVID-19 outbreak is the Prime Time Sports Grill "sports bar" located in Tampa, Florida, which has a commercial property insurance policy underwritten by a Lloyd's syndicate.
According to the (court papers available here) the insured is seeking a declaratory judgement from the Middle District Court in Florida that it is entitled to claim under the business income cover of up to US$200,000. The policy is written by DTW Syndicate 1991 from June 2019 to June 2020.
The "Complaint and Demand for Jury Trial" on behalf of the insured alleges that the bar notified its insurers of its business interruption loss on 17 March arising it says from the Florida Governor's order to close all bars and restaurants in the state for 30 days which was followed by his "Safer at Home" orders. "This governmental suspension of business had a devastating effect on the insured Prime Time’s business." it alleges and further that "Loss of business Income and operating expenses is specifically covered under the policy, and governmental suspension as a result of COVID-19 is not specifically excluded."
In the 22 page Motion to Dismiss available here as a pdf download), which was filed earlier this month, the Trial Counsel for underwriters requested dismissal of the insured's Complaint stating that there is no cover under the policy's Business Income section of the policy as it requires that the suspension of operations be caused by a “direct physical loss of or damage to property”.
It is very interesting to read the insurer's Motion to Dismiss which includes inter alia the following summarised points:
- the restaurant was not ordered to close and Prime Time remains open and operational as per its website advertising;
- the virus does not cause direct physical damage to the insured property itself and the Governor's orders do not make it uninhabitable;
- The US$2 trn CARES act and other relief programs already provide economic assistance;
- the policy's Civil Authority provision which would give cover in the case of physical damage to property elsewhere leading to a civil authority denying access to an area (not more than one mile), does not apply, as there has been no physical damage to property elsewhere and no civil authority has denied access to its premises.
An interesting and representative case of several businesses seeking BI cover. We await developments.