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Developing Law on COVID-19 Pandemic Insurance Claims

Nov 9, 2021 | Written by: Arthur D. Fialk, Esq. |

A recent unreported case has addressed numerous business interruption insurance claims by essential businesses due to losses because of COVID-19 [Highgate Hotels, L.P.v.  Liberty Mutual Fire Ins. Co., 2021 N.J. Super.  Unpub. Lexis 2404 (Law Div. 2021)].  These were businesses that were allowed restricted operation but were not completely closed. The case applied New York law, but it also noted many similarities with New Jersey law.

Claims of loss or damage under a number of insurance policies were not covered because the policy terms required physical loss or damages involving structural alteration of property or physical contamination of property. The Court held that such physical loss does not include forced closure or restricted use due to governmental orders for reasons exogenous to the premises themselves.

With regard to ingress/egress insurance coverage that would provide coverage for loss of access to a business, the Court held that coverage does not apply to businesses that were not closed by government orders, but were allowed to operate subject to some restrictions or modifications due to COVID-19. This would include essential businesses that were allowed some form of restricted operation.

With regard to the issue of non-essential businesses that were prevented from any operation, the decision did not address that issue.

The case also discussed policy exclusions for pollution and contamination, which included the term virus in the policy exclusion definition language. Such exclusions served to avoid coverage with relation to COVID-19.

With regard to contagious disease coverage, the case did not reach a final decision because the information provided was not sufficiently specific.

A prior unreported case involving a non-essential business that was ordered closed was Optical Servs. USA/JCI v. Franklin Mut. Ins. Co., 2020 N.J. Super. Unpub. Lexis 1782 (Law Div. 2020). That case involved a non-essential business closed by government order.  The decision allowed the case to proceed and continue to explore whether a loss of income claim would have insurance coverage when occupancy is prohibited by civil authorities. There was no final outcome at the time.

These types of insurance claims are a developing area, subject to the specific terms of insurance policies and the details of the claims. Successful litigation claims will likely be difficult to obtain because of the terms and exclusions in existing policies.

Arthur Fialk


Arthur D. Fialk is an associate with Gebhardt & Kiefer, PC.  His primary area of concentration is legal research regarding complex legal issues and preparation of dispositive applications in litigation and appellate practice.

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Any statements made herein are solely for informational purposes only and should not be relied upon or construed as legal advice.