On March 7, 2025, the California Department of Insurance issued Bulletin 2025-7, which provides crucial guidance on the handling of smoke damage claims for properties affected by the Los Angeles wildfires. This bulletin clarifies the Department’s position on insurance coverage for smoke damage and outlines the expectations for insurers in processing these claims. The bulletin
This autumn, the Court of Appeal of England and Wales handed down judgment in UnipolSai Assicurazioni SpA v Covéa Insurance Plc [2024] EWCA Civ 1110. This was an appeal of an Award made in a reinsurance arbitration under section 69 of the Arbitration Act 1996. UnipolSai’s challenge was at first instance before (and dismissed by)
Supply chain disruptions due to natural and man-made events, such as the COVID-19 pandemic, climate change, and global and regional conflicts, have become more prevalent in recent times. Businesses need to focus on these issues more carefully as part of their risk management strategies. Many companies seek to insure potential losses caused by disruptions to their supply chain through first-party or property insurance coverage. The insurance industry has designed a range of coverages for this exposure, the main one being contingent time element (or dependent property) coverage, which provides coverage when (typically) physical loss or damage to a third-party supplier or customer prevents that third party from supplying goods to or purchasing goods from the policyholder. Policyholders need to be aware of certain key issues with this coverage.Continue Reading Tomorrow’s supply chain – First-party insurance coverage for supply chains
Courts continue grappling with the application of California insurance law to COVID-19 business interruption claims. After three years of insurance claims and litigation, the California Supreme Court has agreed to provide guidance as to whether the actual or potential presence of SARS-CoV-2 on insured property can qualify as physical loss of or damage to property in Another Planet Entertainment, LLC v. Vigilant Insurance Company.
District court proceedings
Another Planet operates and promotes concerts, events, and festivals in California and Nevada. After its insurer denied coverage for business income losses incurred, Another Planet filed suit in California federal court seeking coverage under its “all-risk” property insurance policy.
In its amended complaint, Another Planet alleged that the virus was present or would have been present had it not closed its venues in compliance with government orders. The insured further alleged that droplets of the COVID-19 virus physically altered the air and property surfaces, constituting physical loss or damage and rendering the property unusable for its intended purpose and function. The pleading further asserted that minimizing the spread of COVID-19 requires physical alterations, including physical distancing, regular disinfection, air filtration, and installation of physical barriers.
Vigilant Insurance moved to dismiss on the basis that Another Planet had not sufficiently alleged direct physical loss or damage to property. On June 21, 2021, the District Court granted the insurer’s motion and dismissed the case with prejudice. Continue Reading California Supreme Court to offer guidance for COVID-19 coverage cases
I recently wrote about lessons that could be learned from the ongoing insurance coverage jurisprudence related to the coronavirus / Covid-19 pandemic. That article discussed broad trends that had developed and cohered across this vast litigation landscape, through multiple decisions in many courts over the course of several months or more. Although descriptive, most of those trends have been and are anti-plaintiff, anti-policyholder, and anti-insurance recovery.
Is a pro-policyholder trend on the horizon?
This piece is different in two important respects. First, it focuses on a point that has not yet achieved a level of pervasiveness that could be fairly characterized as a trend, although it should and hopefully will reach that point soon. Second, this piece discusses a positive outcome for policyholders seeking to recover for their coronavirus- and Covid-19-related losses.Continue Reading Policyholders seeking coverage for Covid-19-related losses may have reason to be optimistic
In the past few months, in cases considering whether SARS-CoV-2/COVID-19 can cause direct physical loss or damage to property so as to trigger business income coverage, policyholders have secured three wins in state appellate courts: Ungarean in the Superior Court of Pennsylvania, Huntington Ingalls in the Vermont Supreme Court, and Cajun Conti in the Louisiana
At $40-70 billion in estimated insured losses, Hurricane Ian is the nation’s second most expensive natural disaster for the insurance industry. Less than two months later, Hurricane Nicole made landfall in Florida. Securing insurance coverage for these losses will be an important part of rebuilding and recovery.
Recently, Reed Smith’s insurance coverage lawyers hosted a webinar, “Maximizing Insurance Recovery after Hurricane Ian,” to answer several frequently asked questions policyholders ask (or should ask) to ensure maximum recovery after these natural disasters. We summarize a few of those answers below.
What type of insurance coverage applies? Property Damage? Business Income? Ordinance and Law? Service Interruption? All of the above?
Put simply, the answer is: It depends on the facts and the language of the policy, but one or more types of coverage may apply. For example, a policyholder may have property damage coverage if they sustained physical damage to buildings, business property (e.g., machinery, equipment, raw materials, etc.), or property of others in the policyholder’s control. That same policyholder may also have service interruption coverage if they experienced dislocation of utility or telecommunications service and suffered business income losses as a result.
All types of common coverages are discussed during the webinar, which can be viewed on demand.Continue Reading Hurricane Ian and Hurricane Nicole: Answering questions policyholders frequently ask (or should ask) to ensure maximum recovery
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?
This year, Hurricane Ian swept through the Southeastern United States, causing extensive damage to property in the affected areas. While obtaining insurance recoveries for any loss can be a complex endeavor, recovery for hurricane loss is particularly complex, as it typically involves a mix of covered and excluded perils. Most standard homeowners or other property insurance policies provide coverage for wind-related losses, but exclude coverage for loss caused by flood. While some policyholders may have purchased standard flood insurance policies that provide coverage for flood losses; many have not. Whether the policyholder has a homeowner’s or general property policy, a flood insurance policy, or both, the question of recovery for damage caused by mixed wind and flood forces requires a complex analysis as both covered and uncovered causes may contribute to the damage to insured property.
Analyzing combined causes of loss
Where a loss stems from multiple causes, some covered and others excluded, coverage will depend on whether the causes are contributing, or separate and independent causes of loss.
Where separate perils combine to create one indivisible loss, these will be considered combined or contributing causes of loss and courts will generally apply one of two tests:
Continue Reading Maximizing recovery for combined wind and flood damages in hurricane claims
On October 4, the California First Appellate District in Amy’s Kitchen, Inc. v. Fireman’s Fund Insurance Company, 2022 Cal. App. LEXIS 836, reversed a trial court’s order granting the insurer’s demurrer in a COVID-19 property damage claim, and remanded to allow the policyholder to amend its allegations of loss under a communicable disease coverage extension. In so doing, the court applied correctly the pleading standards in California, and a process of careful evaluation of the policy language in context, existing physical loss or damage law in California, ultimately applying the clear language in the policy in a common sense manner. The Amy’s Kitchen decision is important because it interpreted the policy in the way a reasonable layperson would read its language, focusing on the actual policy language, not terms of art defined by case law.
The facts
Amy’s employs more than 2,500 people to manufacture meals at facilities in California, Oregon and Idaho. As alleged in Amy’s complaint, COVID-19 was present at Amy’s locations because some of Amy’s employees had confirmed cases, prompting Amy’s to take measures to mitigate, contain, clean, disinfect, monitor and test for COVID-19. Public health orders also required Amy’s to implement various measures, including decontamination, disinfection and sanitization of its facilities to continue operating.Continue Reading Amy’s Kitchen: A step in the right direction