Louisiana Seeks to Protect Businesses, Big or Small, from COVID-19Louisiana, like many other states, has proposed two insurance coverage bills in response to COVID-19’s devastating impact on businesses. While Louisiana’s House bill is limited to small businesses, the Senate bill is not. Both require insurers to cover COVID-19 related losses under certain circumstances.

House Bill 858 requires every insurance policy issued to insureds with less than 100 full-time employees that covers loss or damage to property, including the loss of use and occupancy and business interruption, to cover COVID-19 losses. Those policies “shall be construed to include among the covered perils under such a policy, coverage for business interruption due to global virus transmission or pandemic, as provided in the Emergency Proclamation Number 25 JBE 2020 and the related supplemental proclamations concerning the coronavirus disease 2019 pandemic” (see HB 858). In response to COVID-19, the governor issued Emergency Proclamation Numbers 25 JBE 2020, 27 JBE 2020, 30 JBE 2020, 32 JBE 2020, 33 JBE 20202, 37 JBE 2020, and 41 JBE 2020.  Proclamation Number 25 declared a state of emergency and the supplemental proclamations gradually extended the restrictions in the state. On April 2, 2020, Emergency Proclamation 41 JBE 2020, among other things, renewed all the previous COVID-19 proclamations and continued the general stay-at-home order (absent essential activities), closure of nonessential businesses, a restriction on those businesses not defined as nonessential to continue operations with only essential employees and minimal public contact with no more than 10 gathering at once, and a curfew from 10:00 p.m. to 5:00 a.m. If this bill becomes law, the scope of available coverage could involve interpretations of governmental proclamations. The bill also defines the coverage period by requiring insurers to indemnify policyholders, subject to limits, for business interruption and loss of business that occurs during the duration of the public health emergency.

Senate Bill 477 is not limited to particular insureds and likewise requires business interruption coverage to include COVID-19:  “[n]otwithstanding any other provision of law to the contrary, every policy of insurance in force in this state on March 11, 2020, and thereafter insuring against loss or damage to property that includes the loss of use, loss of occupancy, or business interruption shall be construed to include among the perils covered under that policy, coverage for business interruption due to imminent threat posed by COVID-19 [. . .]” (see SB 477. Under this bill, the “imminent threat posed by COVID-19” constitutes a covered peril, in an apparent response to insurers’ expected threat defense, i.e., that fear or threat of the virus does not trigger coverage. Under this bill, it does.

Senate Bill 477 also requires any business interruption policy issued on or after August 1, 2020, to include a notice of all exclusions on a designated form signed by the insurer and either the named insured or the named insured’s legal counsel. The signed exclusion form will become a rebuttable presumption that the insured knowingly contracted for the coverage with the specified exclusions. Insurers may seize on the countersignature requirement as a defense to policyholder claims that they did not understand the coverage sold to them.

Watch this blog for future updates.

Homesick for Home Games: Plaintiffs File Class-Action Suit Against MLB Demanding Refunds for TicketsCOVID-19 has changed the daily lives for all Americans, and this includes a spring with no baseball. Fans across the nation had tickets in hand for the 15 games set for Opening Day on March 26, 2020. However, on March 12, 2020, Major League Baseball (MLB) announced that Opening Day would be postponed.  Now, seven weeks into the original MLB schedule and no games played, fans are beginning to see the season as cancelled, despite MLB’s attempt to come to an agreement with the players to begin the season in July.

On April 20, 2020, fans in California filed a class-action in federal court against MLB, StubHub, Ticketmaster, Live Nation, and Last Minute Transactions demanding refunds for their tickets to now indefinitely postponed games. The plaintiffs argue that it is very unlikely that the 2020 season will proceed and, if it does, it will likely be without fans in attendance.

People aren’t just demanding refunds for baseball tickets. Class-action suits have been filed against American Airlines and Delta for failure to refund plane tickets, against SXSW for failure to refund tickets to the cancelled music festival, and against StubHub for a variety of tickets sold to now cancelled events. Class-action suits have been filed against 24 Hour Fitness, New York Sports Club, and Town Sports International for continuing to charge gym members their membership fees despite the gyms being closed due to COVID-19. There have also been class-action suits against colleges and universities, including Columbia, Pace University, Long Island University, University of California, California State University, Drexel, and the University of Miami, demanding a refund for tuition and fees because of campus closures due to COVID-19.

Courts will examine the terms of the tickets or fees to determine refundability.  Contractual terms about the ticket or fee rolling over or some other alternative remedy other than a direct refund may come into play. Expect more class-action suits in a broader variety of industries as people continue to pay for services and goods they can no longer use or attend.

Business Interruption Coverage for COVID-19 Losses: You Can Satisfy the “Physical Loss or Damage” Requirement in Your Commercial Property Policy

Although your insurance company undoubtedly will try to convince you that you have no coverage for your business interruption losses from COVID-19, do not be so quick to accept the insurer’s position. In its simplest terms, the business interruption coverage in most commercial property policies provides coverage for a covered cause of loss if (1) a suspension of operations has occurred for a certain period of time; and (2) the suspension is caused by direct physical loss or damage to property. In light of states’ business-shutdown orders due to COVID-19, policyholders have met the first requirement – a suspension of its operations.

The central question becomes whether businesses and organizations can meet the “direct physical loss or damage” requirement typically found in property policies. We discussed in a previous blog that numerous court decisions in which microscopic and non-visible property damage, including permeated odors, E. coli bacteria, and similar contaminants, constituted “physical loss or damage.” But courts have gone even further than simply holding that non-visible and molecular-level property damage satisfied the “physical loss” requirement for business interruption coverage.

Courts have held that the key consideration is not whether property damage exists, however microscopic that damage may be, but rather whether property has become unsafe or uninhabitable for use. The Supreme Court of Colorado equated the loss of use of property to physical loss or damage in the 1968 decision Western Fire Insurance Company v. First Presbyterian Church. The church sustained physical loss of its property when gasoline accumulation around the church building made its premises uninhabitable and its continued use dangerous. Numerous courts have followed and held that physical loss or damage does not necessitate physical alteration (see Dundee Mutual Insurance Co. v. Martifer, 587 N.W.2d 191, 194 (N.D. 1998) (“Clearly, without qualification, the term “damage” encompasses more than physical or tangible damage.”); American Guarantee & Liability Insurance Co. v. Ingram Micro, Inc., 2000 WL 726789 (D. Ariz. 2000) (finding that “physical damage” includes “loss of access, loss of use, and loss of functionality”); Matzner v. Seaco Insurance Co., 1998 WL 566658 (Mass. Super. Ct. 1998) (adopting the interpretation of “direct physical loss or damage” to include “more than tangible damage to the structure of insured property”)).

Temporary loss of use and loss of functionality alone may satisfy the physical loss or damage requirement in a property policy. For example, when problems with the North American electrical grid caused a four-day electrical blackout to the Northeastern United States and parts of Canada, which closed the plaintiff’s supermarkets, a New Jersey court reversed the trial court’s grant of summary judgment to the insurer (see Wakefern Food Corporation v. Liberty Mutual Fire Insurance Co., 406 N.J. Super. 524 (2009)). The Wakefern court rejected the trial court’s conclusion that “the definition of ‘physical damage’ cannot be extended in this case to include the temporary loss of use due to a power interruption, because the property resumed its former use or function as soon as the power was restored, and its value was not diminished.”

Likewise, property owners who were required to leave their homes due to large boulders and rocks that had fallen on nearby property sustained a physical loss under their homeowners’ policy even though the boulders had not damaged their property (see Murray v. State Farm Fire & Casualty Co., 509 S.E.2d 1 (W. Va. 1998)). Although they had sustained no structural damage to their homes, the plaintiffs’ homes had become “unsafe for habitation, and therefore suffered real damage,” covered by the policy because the boulders could come crashing down at any time.

The law in various jurisdictions may vary, as will particular policy language, but do not be persuaded that your COVID-19 losses are not covered under your property policy without first seeking a legal opinion on your specific policy language and the applicable law for potential recovery.