On Wednesday, a federal judge in Texas denied Factory Mutual’s Rule 12(c) motion for judgment on the pleadings, finding that the plaintiffs adequately alleged that the presence of COVID-19 on their property caused covered physical loss or damage in the case of Cinemark Holdings, Inc. v. Factory Mutual Insurance Co., No. 4:21-CV-00011 (E.D. Tex. May 5, 2021). This is the third COVID-19-related business interruption decision from Judge Amos Mazzant since March, but the first in favor of a policyholder. Taken together, the three decisions have two key takeaways and provide a roadmap for policyholders in all jurisdictions.

Continue Reading Allegations That COVID-19 Was Physically Present and Altered Property are Sufficient to Sustain COVID-19 Business Interruption Suit

On Wednesday, a federal judge in New York denied FM’s Rule 12(c) motion for judgment on the pleadings after finding the Contamination Exclusion in the Factory Mutual policy to be ambiguous as to whether it bars coverage for business interruption losses resulting from communicable disease.  The case is Thor Equities, LLC v. Factory Mutual Ins. Co., No. 20 Civ. 3380 (AT) (SDNY).  This is a critical decision under the Factory Mutual policy form, which is substantively the same as policies issued by Factory Mutual’s sister company, Affiliated FM Insurance Company.  Factory Mutual and Affiliated FM have maintained that the contamination coverages are “exceptions” to this exclusion, with the exclusion precluding coverage for communicable disease loss under other policy coverages.  But the ruling validates what policyholders have been arguing – that communicable disease “loss” is covered throughout the Factory Mutual policy, in addition to under the sublimited communicable disease emergency response coverages.

Continue Reading Factory Mutual’s “Contamination” Exclusion Is Ambiguous; May Not Limit Coverage For COVID-19 Business Interruption Loss

New Jersey’s highest court heard arguments Monday in the appeal of a ruling that the New Jersey Transit Corp.’s (“NJ Transit”) insurers are required to insure $400 million of water damage loss caused by Hurricane Sandy.

The matter stems from an insurance claim NJ Transit made after the super storm rocked the East Coast in 2012. NJ Transit claimed over $400 million in losses as a result of damage to its tracks, bridges, tunnels and power stations. In response, its tower of property insurers took the position that a $100 million flood sublimit applied to limit NJ Transit’s recovery under its insurance tower, not the policy’s $400 million overall limits.
Continue Reading New Jersey Supreme Court Hears Insurers’ Bid to Overturn a $400M Decision

On November 10, 2020, a New York federal judge dismissed an insurer’s counterclaims seeking to cap its exposure under a $15 million sublimit and an order estopping the policyholder from pursuing any additional amounts.

Continue Reading Federal Judge Refuses to Limit Coverage and Moves Forward with Policyholder’s Claims Against Insurer and Broker

In American Reliable Insurance Company v. Lancaster, the Georgia Court of Appeals reversed the denial of a property insurer’s summary judgment motion concerning the insurer’s denial of a fire loss claim.  The basis of the denial was that the policyholders had failed to pay the policy premium.  The policyholders, Charlie and Wanda Lancaster, claimed that they had paid their policy premiums for several years to their insurance agent, Macie Yawn.  In October 2014, American Reliable mailed a renewal notice to the Lancasters notifying them that premium payments had to be made directly to the insurer.  After it did not receive payment from the Lancasters, American Reliable sent them a cancellation notice in December 2014, again notifying them that payments be made directly to the insurer.  The Lancasters denied having received either notice from American Reliable, but the record included a receipt for certificate of mailing.

Continue Reading Georgia Court of Appeals Upholds Denial of Coverage Because Insurance Broker Lacked Agency to Accept Premium Payment

As we explained in our earlier post, in a decision that could influence how policyholders and insurers around the world address business-interruption coverage for COVID-19 losses, the London High Court recently handed down its much-anticipated judgment in the Financial Conduct Authority’s “Test Case,” The Financial Conduct Authority (FCA) v. Arch et al.  Because the judgment provided that coverage was available for COVID-19 business-interruption losses under most of the policy wordings at issue, it was highly anticipated that the insurance companies at issue would challenge the judgment in a fast-tracked “leapfrog” appeal to the Supreme Court of the U.K., expected to be heard by the end of the year.  Yesterday, however, six of the insurance companies subject to the judgment decided not to pursue an appeal in connection with some of the policies, and one of the insurers stated that it would instead begin to make payments where appropriate.

Continue Reading Insurance Companies Drop Appeal Against the London High Court’s Ruling in the FCA’s “Test-Case”

In a decision that will influence how policyholders and insurers around the world address business-interruption coverage for COVID-19 losses, the English High Court recently handed down its much-anticipated judgment in the “Test Case,” The Financial Conduct Authority (FCA) v. Arch et al. The High Court’s comprehensive analysis will likely serve as an additional tool in policyholders’ arsenal in the ongoing battles over COVID-19 coverage.

Continue Reading English High Court Finds That Business-Interruption Insurance Can Cover COVID-19 Losses

On Tuesday, the English High Court will issue its much-anticipated ruling in “test cases” for coverage of business-interruption losses during the COVID-19 pandemic under sample policy wordings. Irrespective of the outcome, the London court’s ruling promises to be a significant development for the insurance markets in the UK, as billions of pounds in potential insurance claims are at stake and––beyond this––policyholders and/or insurance companies can be expected to argue that one or another of the findings supports their position(s) for interpreting similar policy language in future COVID-19 business-interruption coverage cases.

The FCA Test Case

In the first action of its kind since the agency was established in 2013, the British markets regulator, the Financial Conduct Authority (FCA), engineered the test case process earlier this year to seek legal clarity over insurance companies’ obligations to cover business-interruption claims in the context of the ongoing COVID-19 pandemic. Brought before the English High Court (a trial level court in the UK), the FCA test case involves around 370,000 policyholders and eight insurance companies. The case was heard by Judge Christopher Butcher, who sits in the Commercial Court, and Judge Julian Flaux from the Court of Appeal.  Experienced English counsel prepared and presented arguments to the tribunal for expedited consideration and resolution. The FCA hired a solicitor firm, which instructed well-regarded barristers from Devereux Chambers and Fountain Court Chambers; the insurers engaged their own solicitors and barristers.


Continue Reading Policyholders and Insurers Await Highly Anticipated English High Court Ruling Regarding Coverage for COVID-19 Business-Interruption Losses

Walmart announced this week that it is testing a pilot program in North Carolina for the delivery of groceries and household items using automated drones, joining other retailers looking to beef up their drone delivery business.  In a related development, last week the Federal Aviation Administration (FAA) designated Amazon Prime Air as an “air carrier,” a key step in the process of Amazon’s quest to expand into the delivery-by-drone arena.  Amazon joins Wing, the Alphabet Inc. subsidiary, and UPS as companies that have obtained FAA approval to operate unmanned aircraft systems (i.e., drones) under the federal regulations.  Given the rapid rise of commercial drone use, businesses have understandably grown concerned that their drone technologies will expose them to a new set of risks, including damage to the drone itself, as well as third-party claims following property or physical injury caused by a company-operated or company-owned drone (and other third-party claims like invasion of privacy).  In light of these risks, it is key that businesses using drones obtain the insurance coverage necessary to protect themselves against such risks, and that they explore all coverage options should a drone-related loss arise in order to maximize their chances of insurance recovery.

Continue Reading As Amazon’s and Walmart’s Drones Take to the Skies, it is Important for Commercial Policyholders to Have a Strategy to Protect Against Drone-Related Risks and to Maximize their Recovery in the Event of a Loss