Everyone in the business and insurance communities knows about the blossoming coronavirus lawsuits. These cases are largely ongoing, but there’s one exception in San Antonio. A group of barbershops sued their insurer, State Farm, over denied insurance coverage related to the pandemic. A federal judge has dismissed the lawsuit, in a win for the insurance company.
U.S. District Judge David Ezra has ruled that State Farm’s insurance policies don’t cover coronavirus-related economic losses. More specifically, the losses incurred when several barbershops closed under county and state orders are not recoverable under their policies. The shutdown orders were intended to stop the spread of the deadly COVID-19 disease. All of the barbershops are owned by Shayne Brown.
The losses to Brown were undeniable. Judge Ezra expressed sympathy over the drop in revenue because of the government stay-at-home orders. These and related mandates across the country have closed non-essential businesses and, thereby, resulted in significant losses of income. The same is true for Brown, who was forced to shut down in March and April.
However, the State Farm policies covering the shops simply provide no remedy. The judge ruled that the policies require physical damage in order for a policyholder to recover. Moreover, at least with respect to these policies, there is additional language barring recovery. After the SARS virus outbreak in 2002, a clause was added exempting coverage for viruses.
The policy language, therefore, bars recovery because of pandemic-related closures. And a court cannot simply ignore these clauses, even in the face of unprecedented economic losses. To do so, the court would have to effectively rewrite the insurance policies. That’s something the court simply has no power to do.
Shannon Loyd, the attorney representing Brown, has stated her client hasn’t decided whether to appeal.
Disputes over insurance policy denials related to coronavirus have largely centered on what’s called business interruption coverage. This is sometimes called income interruption insurance. Clauses like these are intended to compensate businesses that are forced to temporarily shut down. However, as the insurers have argued, these policies are not broad enough to cover pandemics like coronavirus. Business interruption is typically designed to cover fires, weather disasters, and other unexpected phenomena.
Not only do policies usually not mention pandemics, but as with the State Farm case, they may even exclude them. The exclusion language inserted into the company’s policies in the wake of SARS is interesting. It shows that State Farm recognized the tremendous losses that viruses could cause for their policyholders – and, therefore, them. It is likely that other insurers will add similar language in future policies.
Cases like these are ongoing across the country. Insurers are facing a wave of pandemic lawsuits prompted by government-mandated shutdowns and resulting lost revenue. The insurance industry in particular is watching cases like these closely. And there’s a good chance that new lawsuits will continue to be filed for some time in the future. At least, in this case, the decision strikes a blow for insurers defending against potentially devastating claim payouts.
Are You Facing a Coronavirus-Related Insurance Claim? If so, We May be Able to Help
If your insurance company is being sued over coronavirus-related losses, you need top-notch legal representation. If your company is located in New York, turn to the insurance defense lawyers of Rosenbaum & Taylor. We can also help if you simply have questions about your potential exposure. We will review your case and advise you of your legal options. If your insurance company is ultimately sued, we can aggressively defend your rights and interests in court. Give our office a call today to learn more and to get started.