Hunton Insurance Recovery Blog

The wave of COVID-19 litigation should cause courts to consider whether the plain meaning of a general liability insuring agreement triggers coverage for certain damages flowing from COVID-19 losses. Policies with insuring agreements providing coverage “because of” bodily injury or property damage are broader than those that apply coverage “for” bodily injury or property damage. Hunton Andrews Kurth insurance attorneys Syed S. Ahmad and Rachel E. Hudgins authored an article published by the Insurance Coverage Law Center analyzing this difference. The full article is available here.

The California Supreme Court ruled that vertical exhaustion applied to determine how a policyholder could access its excess insurance policies. Montrose Chem. Corp. v. Superior Court, No. S244737 (Cal. Apr. 6, 2020). The case involved coverage for Montrose Chemical Corporation’s environmental liabilities at its Torrance facility under insurance policies issued from 1961 to 1985. Montrose and its insurers agreed that Montrose’s primary policies were exhausted but disputed the sequence in which Montrose could access the excess insurance policies.

Louisiana joins a growing list of states, including New Jersey, Massachusetts, Ohio, and New York that are considering legislation, here and here,  that would require insurance coverage for the business interruption losses caused by COVID-19.  We have discussed other legislative efforts here and here.  The Louisiana House and Senate have each put forth bills that would, like the other states’ measures, require insurers to cover business interruption losses due to COVID-19 despite policy language that an insurer might try to rely on to argue otherwise.  Unlike the other bills ...

Following New Jersey, where similar legislation remains under informal discussion, lawmakers in Ohio, Massachusetts, and New York have now introduced legislation that would provide relief to small businesses for COVID-19 business interruption losses.  The legislation is conceptually identical to the legislation introduced in New Jersey, discussed here last week.  Although the New Jersey bill was subsequently pulled for further consideration with insurance industry representatives, it does appear to have been the roadmap for the Ohio, Massachusetts, and New York measures.  ...

Following on the heels of the directive issued to business-interruption eruption, insurers by the New York Department of Financial Services, Ricardo Lara, the Insurance Commissioner for the State of California, issued a “request for information,” about business interruption and related coverages so that the State can address “public policy options” and “understand the number and scope of business interruption type coverages in effect” in California and “the approximate number of [such] policies that exclude viruses such as COVID-19.”

A Houston-area wig store filed the first Texas COVID-19 lawsuit concerning business interruption losses Thursday in a state court in Harris County. The plaintiff, Barbara Lane Snowden DBA Hair Goals Club, filed suit, a copy of which can be found here, against Twin City Fire Insurance Company, a Hartford Insurance company. The lawsuit alleges that plaintiff has sustained and will continue to sustain covered losses during the COVID-19 outbreak and subsequent Harris County Stay Home Order. The lawsuit further alleges that plaintiff already sought coverage for its business interruption costs under the Twin City policy, but that claim was denied. Accordingly, plaintiff has alleged breach of contract, unfair settlement practices, violation of the Prompt Pay Act, and breach of the duty of good faith and fair dealing for Twin City’s wrongful denial of the claim.

While COVID-19 occupies most of the world’s attention, cyber-criminals continue to hone their trade. Consequently, with attention diverted and business-as-usual changing daily, the recent rise in cyber-related attacks comes as no surprise. Analysts have found that companies with an increased number of employees working remotely as a result of the coronavirus pandemic have witnessed a spike in malicious cyber-attacks. For example, the United States Health and Human Services Department experienced two separate cyber-attacks since the onset of COVID-19, with the attacks aimed at sowing panic and overloading the HHS servers.[1] These attacks, however, are not limited to the United States, as they have been reported across the globe. For instance, hackers launched a cyber-attack on a hospital in the Czech Republic, stalling dozens of coronavirus test results, only days after the government declared a national emergency.[2]

In responding to a certified question from the Fifth Circuit in Richards v. State Farm Lloyds, the Texas Supreme Court held that the “policy-language exception” to the eight-corners rule articulated by the federal district court is not a permissible exception under Texas law.  See Richards v. State Farm Lloyds, 19-0802, 2020 WL 1313782, at *1 (Tex. Mar. 20, 2020).  The eight-corners rule generally provides that Texas courts may only consider the four corners of the petition and the four corners of the applicable insurance policy when determining whether a duty to defend exists.  State Farm argued that a “policy-language exception” prevents application of the eight-corners rule unless the insurance policy explicitly requires the insurer to defend “all actions against its insured no matter if the allegations of the suit are groundless, false or fraudulent,” relying on B. Hall Contracting Inc. v. Evanston Ins. Co., 447 F. Supp. 2d 634, 645 (N.D. Tex. 2006).  The Texas Supreme Court rejected the insurer’s argument, citing Texas’ long history of applying the eight-corners rule without regard for the presence or absence of a “groundless-claims” clause.

Two more lawsuits were filed yesterday concerning business interruption losses resulting from the COVID-19 pandemic.  The plaintiffs, the Chickasaw and Choctaw nations, filed their lawsuits, copies of which can be found here and here, in Oklahoma state court against a litany of property insurers, led by AIG.  The lawsuits seek an order that any financial losses suffered by the nations’ casinos, restaurants and other businesses as a result of the coronavirus pandemic are covered by the nations’ insurance policies.

Last week, we reported that the New Jersey General Assembly passed a bill that would force property insurers to cover certain business interruption losses arising from COVID-19.  The bill presented a lifeline to small businesses in New Jersey that are being racked by the economic fallout stemming from COVID-19.  Before reaching the New Jersey Senate, however, the bill was pulled from consideration with little explanation.  The bill’s sponsor, Assemblyman Roy Freiman, D-16th District, reportedly stated that, in lieu of the legislation, insurers would be given the opportunity to ...