THE COVID-19 pandemic caused significant business disruptions. However, numerous businesses have been denied insurance relief for the losses they incurred. Some have turned to the courts for help only to again be denied.
But in a recent victory for the insured, the California Court of Appeals found that a popular San Francisco restaurant, John’s Grill, was entitled to an insurance payout from business losses they suffered as a result of the public quarantine orders that forced them to cease operations. John’s Grill sued their insurer for breach of the insurance contract and bad faith denial of insurance coverage for their COVID-19 claims.
Prior to the John’s Grill case, many businesses had been denied COVID-19 insurance claims based on policy language that required physical loss or damage of business property. Many courts agreed with company arguments that the forced closures of businesses to stop the spread of COVID-19 did not involve a physical loss or damage.
However, the Court in the John’s Grill case note that the insurance policy there included language that did not require proof of physical damage or loss. Specifically, an endorsement included coverage for “loss or damage” caused by a virus, which is broad enough to encompass a loss that does not involve physical alterations of property. It covers costs of tearing out and replacing items for mitigation, virus removal, and testing.
The business-interruption provisions of the insurance policy were also covered. If the presence of virus on John’s Grill’s premises led patrons to cease coming to its restaurant due to the fear of contracting an illness the court believes that a reasonable insured would also have an expectation of coverage ”for the “resulting loss of its ability to use the restaurant for its intended purpose.
In the almost 3 years since the COVID-19 pandemic shut down or severely interrupted the operations of many business, insured businesses have been quickly turned away by insurers denying their claims. The important lesson of John’s Grill is that relief for business losses arising from COVID-19 may be obtained from insurance coverage, depending largely on the specific language of the applicable policies and the reasonable intents of the insured.
The court remarked that the parties customized the insurance policy to accommodate additional coverage for “property damage from fungi, wet rot, dry rot, bacteria or virus that may occur in a restaurant environment.” And under the endorsement language the parties agreed upon to accomplish this objective, the wording is broad enough to bring within the scope of coverage loss of use of property.”
This decision is good news for business owners who continue to experience denials of their insurance claims related to COVID. They are well advised to have their policies evaluated by experienced insurance lawyers.
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The opinions, beliefs and viewpoints expressed by the author do not necessarily reflect the opinions, beliefs and viewpoints of the Asian Journal, its management, editorial board and staff.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com. [For more than 30 years, the law firm successfully obtained significant recoveries in wages and monetary damages for thousands of employees and consumers. Mr. Sayas was named Top Labor & Employment Attorney in California by the Daily Journal, selected as Super Lawyer by the Los Angeles Magazine for 11 years, and is past Presidential Awardee for Outstanding Filipino Overseas.]
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