Missouri judge empowers business owners to sue insurer for coronavirus losses

by Abdulmumeen S. Yitta

A Missouri federal judge said on Wednesday August 12, 2020, that business owners such as hair salons and restaurants can sue their insurance carriers for business interruption losses occasioned by coronavirus pandemic.

The case, Studio 417 Inc et al v Cincinnati Insurance Co, U.S. District Court, Western District of Missouri, No. 20-03127, was a big win for policyholders who have been suing insurers for coronavirus-related damages in their businesses.

According to the plaintiffs’ lawyer, Brandon Boulware, the case against Cincinnati Insurance, a unit of Cincinnati Financial Corp, was a significant win for the policyholders.

Several lawsuits have been filed by business owners in which they have claimed their business interruption insurance.

They say that the insurance that covers losses from calamities like flood or fire should as well cover pandemic losses.

However, insurers have refused to accept such coverage saying that it could result in depletion of their payouts and capital.

Insurers have previously won similar cases in Michigan’s and Washington, D.C’s courts. They claimed that coronavirus does not cause any apparent physical damage because it travels through the air; therefore there was no warranty for such coverage.

Judge Stephen Bough of Kansas City, while making the decision regarding the case did not rule on its merit. He rather said that Covid-19 scenario is not a benign thing for businesses to experience.

Similarly, the plaintiffs alleged with higher degree of plausibility that the particles have rendered their property unsafe and unusable because the particles were physical substances that have eventually damaged them.

Boulware said that the policy of Cincinnati does not have any exclusion for losses caused by virus, holding the insurer much more responsible for such losses.

“The Cincinnati policy is an ‘all risks’ policy and does not contain any exclusion for losses caused by a virus. The court’s order correctly recognizes that,” said Boulware.

Similarly, several hundreds of other lawsuits seeking business interruption coverage for COVID-19 are under considering by the Judicial Panel on Multidistrict Litigation as to whether or not to ratify them.

However, in their analyses of the coronavirus-related losses for business owners, analysts have said that the losses have been to some extent modest.

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