A Missouri federal judge allowed a lawsuit to go forward against an insurance company for a coronavirus pandemic business interruption claim, reported Law.com.
U.S. District Judge Stephen Bough of the Western District of Missouri denied Cincinnati Insurance Co.’s motion to dismiss a complaint filed by Studio 417, which operates hair salons in Springfield, Missouri, along with a group of salons and restaurants there and in Kansas City. Bough ruled Aug. 12 that the 54-page complaint with 253 separate allegations adequately states claims that can be litigated.
Bill Cash of Levin Papantonio Thomas Mitchell Rafferty Proctor in Pensacola, Florida said hr tried and failed to survive a motion to dismiss in a couple of similar cases, but sees this one as a hopeful sign for hundreds of other clients.
“These cases could come out differently in different states, but we are encouraged,” Cash said. “We are heartened by this decision.”
The prevailing legal team on the Missouri case certainly shares that sentiment.
“This is a significant early win in our case against Cincinnati Insurance Co.,” said Brandon Boulware of Boulware Law in Kansas City, Missouri. “And because the key language in the Cincinnati policy is similar to language in policies offered by other insurance companies, the court’s decision in our case will likely have a rippling effect in other lawsuits filed against other carriers.”
He represents the businesses along with Jeremy Suhr of Boulware Law, Jack Hyde, Tom Rottinghaus and Tyler Hudson of Wagstaff & Cartmell and Todd Johnson of Votava Nantz & Johnson, all in Kansas City.
“Our case, like others on file, seeks to compel the carrier to abide by the terms of the insurance policies that the carrier itself drafted,” Boulware said. “It is a well-established rule in insurance law that where a policy is ambiguous, such ambiguity is construed against the carrier and in favor of coverage. Our position is that the Cincinnati policy is not ambiguous and provides coverage, but even if ambiguity is found, that ambiguity benefits the policyholders.”
The businesses purchased all-risk policies, which means anything not expressly excluded is covered, the judge said.
“Plaintiffs seek coverage under the policies for losses caused by the coronavirus (‘COVID-19′) pandemic. Plaintiffs allege that over the last several months, it is likely that customers, employees, and/or other visitors to the insured properties were infected with COVID-19 and thereby infected the insured properties with the virus,” Bough said. “Plaintiffs allege that COVID-19 ‘is a physical substance,’ that it ‘live[s] on’ and is ‘active on inert physical surfaces,’ and is ‘emitted into the air.’”
The judge said the businesses also have alleged that the presence of COVID-19 “renders physical property in their vicinity unsafe and unusable,” and that they “were forced to suspend or reduce business at their covered premises.”
Of course, he noted, in response to the COVID-19 pandemic, “civil authorities in Missouri and Kansas issued orders requiring the suspension of business at various establishments,” including those owned by the plaintiffs. Those orders “have required and continue to require” ceasing or significantly reducing operations and access. The businesses claim the virus and the closure orders “caused a direct physical loss or direct physical damage to their premises,” the judge said.
“The court finds that plaintiffs have adequately stated a claim for direct physical loss,” Bough said. He added that because the policies do not define a direct “physical loss” he must “rely on the plain and ordinary meaning of the phrase.”
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