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Are Economic Losses Caused by COVID Shutdowns Recoverable Under Commercial Property Insurance Policies?

June 30, 2022

Greg McNeill Allison Gray*

As we have previously written, whether economic losses caused by COVID shutdowns can be recovered under commercial property insurance policies is a hotly-contested issue. (Past articles include, 'Will Your Business Interruption Insurance Actually Pay for Business Interruption?', 'Update on COVID-19 and Insurance Coverage' and 'Business Interruption Insurance: Will Insurers Be on the Hook for Business Losses Stemming from COVID-19?'). In a recent opinion, Commodore, Inc. v. Certain Underwriters at Lloyd's London, the Third District Court of Appeals of Florida says “no”.

A restaurant owner in Miami-Dade County filed suit claiming that the restaurant suffered losses caused by the COVID-19 suspension of operations and those losses should be covered under its all-risk commercial property insurance policy. As with most property policies, the court noted that the key is whether the economic losses relate to a “physical loss of or damage to” the property. The Court rejected the restaurant’s argument that this language should include situations where the insured’s commercial property is “unusable for its intended income-producing purpose” because of COVID-19. Here, the restaurant was closed and thus lost revenues.

The Court looked to the Oxford English Dictionary to determine that the ordinary meaning of “physical” requires a tangible aspect, some “actual alteration of the insured’s property.” Under the circumstances, the restaurant was unable to demonstrate any physical alterations or damage to the property and therefore could not recover insurance proceeds.

The Court also rejected the argument that because the COVID-19 virus itself was physically present in the restaurant, this constituted the necessary physical alteration.The Court noted that surfaces can be easily cleaned and as such cannot be considered a loss under the insurance policy.

Because commercial property insurance policies often vary in their terms, business owners should seek the advice of counsel to determine whether under their specific policy, they have a viable insurance claim for losses incurred as a result of COVID-19 shutdowns and suspensions. It is certain that this issue will continue to be hotly litigated and other courts have reached different conclusions.

Be sure to visit our Coronavirus (COVID-19) Response Team page to keep up to date on the latest news.

*Allison Gray, a summer law clerk, assisted with this article.

This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

Greg McNeill is a trial and sports law attorney and chairs the firm's Litigation Department.

Greg's litigation practice includes business and real estate litigation, construction litigation, commercial landlord/tenant disputes, enforcement of non-competition, confidentiality and trade secret agreements, employment law, intellectual property, church property litigation and appellate practice.

As a sports law attorney, he has represented athletes and coaches in the NBA, NFL, Major League Baseball, PGA Golf and other sports in team contract negotiations, endorsement contracts, name and image licensing agreements, book publishing opportunities and public appearances.

Greg is an experienced trial attorney with considerable courtroom experience in state and federal courts. He has successfully handled a wide variety of lawsuits, from defending the property of a local church from the efforts of its denomination to seize it to the aviation litigation arising from the 1999 Lear Jet crash which took the life of PGA Tour golfer Payne Stewart. 

He is an equally accomplished negotiator and is just as proud to help a client reach a satisfactory settlement as he is to win a jury verdict. His philosophy is to prepare for trial but seek to settle.

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