Insurance companies prevailing
Two significant business interruption (BI) insurance claim cases here in Florida – one which builds on the other – were recently decided in favor of the insurance companies. Together, they’re expected to make it significantly difficult to prove coronavirus-related BI claims. To date, no Florida court has ruled that coverage exists for those BI claims.
Last week, a federal magistrate recommended a case brought by Malaube LLC against Greenwich Insurance Company be dismissed. The Miami restaurant company sued to get reimbursement for income losses at its Spris Artisan Pizza caused by government-mandated closure. U.S. Magistrate Edwin Torres in his report found the restaurant failed to meet its coverage threshold of tangible “direct physical loss of or damage” to premises. Malaube argued the prerequisite should be satisfied, given the property was “uninhabitable” or “substantially unusable.” Judge Torres said that wasn’t the case, noting that takeout and delivery from the restaurant was still allowed under the local government order, although it’s not clear whether the eatery utilized those options.
Judge Torres also noted a ruling in another Miami restaurant case decided this month, Mama Jo’s v. Sparta Insurance Co before the 11th Circuit Federal Court of Appeals. In that decision, U.S. District Court Judge David Proctor wrote that under Florida law “an item or structure that merely needs to be cleaned has not suffered a ‘loss’ which is both ‘direct’ and ‘physical.’” He upheld a ruling by the U.S. District Court in Southern Florida against the restaurant.
The Mama Jo’s case is not COVID related, rather a claim that dust and debris from a nearly two-year long road project reduced the restaurant’s traffic and income and required extra cleaning costs. The restaurant filed a claim under its “all risk” commercial property insurance policy. A second claim filed under a Business Income Coverage form likewise was denied, because it, too, required a direct physical loss or damage to property. Judge Proctor wrote that “an ‘all-risk’ policy is not an ‘all loss’ policy, and thus does not extend coverage for every conceivable loss,” per a previous ruling by the Florida Supreme Court.
We’re told that insurance defense counsel have been using the Mama Jo’s decision in other BI cases, too, which now has more gravitas given the 11th Circuit’s confirmation ruling.
The bottom line in these Florida cases, as well as in recent insurance company victories in Michigan, Texas, Washington D.C., and New York, is that the remedy for those suffering losses is simply cleaning and sanitizing the property. Unfortunately, this pandemic is simply not a risk that was contemplated, nor insurable.
LMA Newsletter of 8-31-20