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Connor O'Carroll

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The ongoing COVID-19 pandemic led to unprecedented closures and losses for businesses throughout the United States. Naturally, policyholders have sought recovery for pandemic-related losses under their “all risk” commercial property policies. According to the University of Pennsylvania Carey School of Law Covid Coverage Litigation Tracker, there have been approximately 2,300 of these COVID-19 coverage cases filed to date. Early pre-trial court decisions overwhelmingly favored insurers; however, recent appellate and high court decisions have demonstrated a slight shift in favor of policyholders.

For example, one of the first COVID-19 coverage decisions was issued by a Michigan state court in the summer of 2020:  Gavrilides Management Company LLC et al v. Michigan Insurance Company. The Gavrilides court rejected the policyholder’s arguments that (1) the loss use of property constitutes a “direct physical loss” covered by the policy and (2) the virus exclusion should not apply since the loss use was caused by government orders. This full dismissal was just the start of policyholders’ uphill court battles.  Since Gavrilides, nearly 70% of state court merits hearings have resulted in a full dismissal with prejudice. In federal courts, that number jumps to nearly 87%.Continue Reading Direct physical loss in COVID Coverage cases: Are policyholders seeing a litigation shift in favor of COVID-19 coverage?

In Deere & Co. v. Allstate Ins. Co., 2019 WL 912151 (Cal. Ct. App. Feb. 25, 2019), a California Court of Appeal recently held that an insured’s self-insured retention (SIR)[1] was considered part of the underlying limit of liability such that it need not be satisfied again and again just to access excess insurance policies. This case represents another example of the California appellate courts shooting down an insurance company’s attempt to overreach. Nonetheless, insurance companies will continue to look for ways to avoid providing the coverage they contracted to provide, and policyholders must always be vigilant.

This particular dispute arose over insurance coverage for several asbestos personal injury claims made against manufacturer Deere & Company arising from products it manufactured from 1958 to 1986. During that period, Deere had coverage in place via a series of first-layer umbrella policies[2] for personal injury claims; several layers of excess insurance provided additional coverage above the limits of the first-layer umbrella policies. In all, there were 49 policies at issue representing $200 million in policy limits. In all of its first-layer umbrella polices, Deere contracted to pay an SIR before the coverage limits would be reached. Deere’s excess policies “followed form” to the first-layer policies, except the excess policies had different limits of liability.
Continue Reading Self-insured retentions are not a windfall for excess insurers looking to avoid coverage

A California Court of Appeal recently held that the alleged loss of use of a premises as a nightclub qualified as “property damage” under a general liability insurance policy. Thee Sombrero, Inc. v. Scottsdale Ins. Co., 2018 WL 5292072 (Cal. Ct. App. Oct. 25, 2018).

Thee Sombrero, Inc. (Sombrero) owned and operated a nightclub in Colton, CA. After a fatal shooting at the club, city officials revoked Sombrero’s use permit and made it so the premises could only be used as a banquet hall. Sombrero sued its private security company, Crime Enforcement Services (CES), claiming that its subpar security caused the shooting and cost Sombrero its ability to run a nightclub on its property.

Sombrero alleged that the property was worth $2,769,231 as a nightclub and only $1,846,153 as a banquet hall. In 2012, Sombrero secured a default judgment against CES for $923,078 – the difference in value between the nightclub and banquet hall.Continue Reading Tangible property doesn’t have to be physically lost to find coverage