According to a report from Bloomberg Law. the United States District Court for the Western District of Washington has recently dismissed hundreds of COVID-19 related business interruption insurance claims. Consistent with many other rulings, Judge Barbara J. Rothstein has determined that the COVID-19 virus is not sufficient to satisfy the “physical damage” requirement of many insurance policies. In this article, our Washington insurance law attorneys provide an overview of the judge’s decision.
COVID-19 Caused Sharp Losses for Many Businesses
On January 21st, 2020, the Centers for Disease Control and Prevention (CDC) confirmed the first COVID-19 case in the United States in a Washington resident. Our state saw the first significant outbreak in the country and quickly imposed restrictions. Of course, as a consequence of the virus and the public health regulations, many businesses dealt with major financial challenges.
Many companies that carried business interruption policies soon filed claims through their insurer. A business interruption policy is a special type of commercial insurance coverage designed to cover losses sustained when a company is temporarily forced to suspend its operations to deal with an emergency.
Insurers are Denying Business Interruption Claims at High Rates
On the surface, it may seem like COVID-19 related business losses should be clearly covered by a business interruption policy. However, the reality is far more complicated. After the SARS outbreak in the mid-2000s, many of these policies were re-written to exclude pandemics and/or require actual physical damage to the premises for coverage to apply. In Washington, insurers are denying COVID-19 business interruption policies at very high rates.
The Ruling: COVID-19 Does Not Meet ‘Physical Damage’ Policy Requirements
A large number of businesses in Washington have filed lawsuits against their insurers’ challenging the denial of the business interruption coverage. One of the key issues in these lawsuits was whether or not the COVID-19 virus could cause “physical damage” sufficient to meet the requirement imposed by many insurance policies.
In dismissing hundreds of business interruption lawsuits, the United States District Court for the Western District of Washington has ruled in favor of the insurance industry on this matter. Writing for the court, Judge Barbara J. Rothstein emphasized that “COVID-19 hurts people, not property”. The virus is certainly at the root of the losses businesses sustained, but it did not cause any physical damage to their premises. Therefore, in the view of the court, the insurance companies in question had the right to deny coverage.
We Wrote the Book on Insurance Law in Washington
At Albrecht Law PLLC, our attorneys wrote the book on insurance law in Washington. Clients rely on us for results. If you have any questions about business interruption insurance or any other type of insurance claim, we are here to provide reliable support. For a free, confidential case evaluation, please do not hesitate to contact us today. We represent policyholders and beneficiaries in Spokane, Spokane County, and throughout the surrounding area in Eastern Washington.