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Will “Business Interruption” Insurance Cover COVID-19 Related Losses?


The COVID-19 pandemic has caused a significant disruption to many Florida business owners. It has also led to litigation over the scope of “business interruption” insurance. In other words, if a business loses revenue due to pandemic-related restrictions, does that qualify as an insurable loss?

The United States Court of Appeals for the 11th Circuit recently addressed this question in a Georgia breach of contract lawsuit, Gilreath Family & Cosmetic Dentistry, Inc. v. Cincinnati Insurance Company. The plaintiff in this case is a dental practice based in Marietta, Georgia. Following the Georgia governor’s declaration of a public health emergency in early 2020 due to COVID-19, the plaintiff followed official guidance and canceled its routine and elective procedures. As this was the bulk of the practice, the plaintiff said it lost a “substantial portion” of its income.

The plaintiff therefore filed a claim on its business interruption coverage with the defendant insurance company. The policy provided coverage for income lost “due to the necessary suspension of its operations” as well as compensation for additional expenses “sustained during that suspension.” The defendant denied the claim, however, noting that business interruption coverage only applied if the suspension was due to a “direct loss to property,” i.e., damage to the insured premises itself. In effect, the insurer’s position was that there had to be some physical damage to the dental office itself–the mere interruption of business due to the state’s health restrictions was not sufficient.

The plaintiff then sued the defendant for breach of contract. But a federal trial court, and later the 11th Circuit, ultimately sided with the insurance company. The 11th Circuit explicitly rejected the plaintiff’s argument that the business interruption language of its policy applied “when government restrictions were in effect” on its practice. As the insurer maintained, the appellate court said the policy language required “physical loss” or damage to the plaintiff’s property. The 11th Circuit added that the Georgia Court of Appeals, interpreting similar policy language, had previously reached the same conclusion.

And there was no dispute that nothing contained in the state’s COVID restrictions damaged the plaintiff’s property. Indeed, the plaintiff never alleged any such damage. The appellate court added that the restrictions did not even force the closure of the plaintiff’s practice, as it remained open for emergency procedures. And even the possibility that keeping the practice partly open during the pandemic–where COVID particles might infect surfaces inside the office–was not enough to qualify as property damage.

Speak with a Florida Insurance Lawyer Today

This is not the last time we will see litigation related to insurance coverage and COVID-19. Insurance companies certainly have a legitimate interest in rejected invalid claims. And businesses affected by the pandemic also have the right to seek clarification as to their rights under a particular policy.

If you need legal advice or representation from a qualified Tampa insurance attorney, contact HD Law Partners today to schedule a consultation.


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