The New Normal in Insurance: COVID-19 Business Loss Declaratory Judgment Lawsuit Filed in Birmingham, Alabama
Prepared by F. Todd Weston
April 8, 2020
It’s no surprise that Alabama has joined the list of jurisdictions with pending COVID-19 declaratory judgment lawsuits, in what we all anticipate will be a flurry of litigation concerning insurance policies and claims for losses stemming from the pandemic.
In what will surely become part of our “new normal” across the country, the popular Birmingham area restaurant, Ollie Irene’s, filed suit this week the Circuit Court of Jefferson County against its carrier, Farmers Insurance Exchange, seeking coverage for business losses stemming from the now all familiar federal and state government-ordered shutdowns. Ollie Irene’s was insured under an all-risk policy, which allegedly provided coverage for all losses not explicitly excluded or limited by the policy terms. Like all restaurants across the country affected by the COVID-19 pandemic scare, Ollie Irene’s claims its business was severely limited by recent government issued orders and social distancing mandates. Through counsel, Ollie Irene’s put Farmers on notice of its claim in late March. The following day, Farmers informed the restaurant it was denying the claim on the following bases: 1) there was no direct physical loss of or damage to property at the described premises; 2) the government’s use of its civil authority to close businesses, access to the described businesses was not prohibited due to direct physical loss or damage to property other than at the described premises, and: 3) because the policy excludes loss or damage caused by or resulting from any virus capable of inducing physical distress, illness or disease.
Ollie Irene’s complaint hinges on the claim that the “any act or decision” of a “government body” language in the Farmer’s policy acts as an exception to the virus exclusion. The gist of the argument is that Ollie Irene’s losses were caused by the government shutdown and not the COVID-19 virus. Ollie Irene claims that the virus exclusion does not apply because the restaurant’s claim is not based on COVID-19, but instead, the government actions which followed as a result of the pandemic. Moreover, Ollie Irene’s argues that focus should be that its losses were “caused by or resulting” from the government actions, and not on the merits of the decision. As a result of the exception, Ollie Irene’s claims that the virus exclusion is inapplicable and its losses are covered under the terms of the Farmer’s policy.
Like the other similar lawsuits being filed across the country, we’ll be keeping a close eye on this matter, as should all carriers who write policies in Alabama. While this case will likely see some delay in motion practice if Farmers removes to federal court, one of these early filed COVID-19 declaratory judgement matters will act as the bellwether precedential case law on this new and emerging issue, regardless of jurisdiction.
The declaratory judgment complaint can be found here if you care to look further into the claims. Ollie Irene’s v. Farmers Insurance
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