Addressing a growing challenge
In response to the increasing severity and complexity of wildfire smoke damage across California, the Department of Insurance announced the creation of a new Smoke Claims & Remediation Task Force. This initiative, spearheaded by Insurance Commissioner Ricardo Lara, aims to establish clear, science-based standards for investigating, paying, and remediating smoke damage
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
Introduction
Judge Corley’s (N.D. Cal.) January 10, 2025 decision in Bottega, LLC v. National Surety Corporation provides guidance for commercial policyholders who have closed down their businesses due to wildfires, smoke, ash and soot that is especially timely given the ongoing wildfires in Southern California. The decision highlights the complexities of business interruption insurance claims, distinguishes
On January 6, 2023, the Third Circuit affirmed lower court rulings in 14 consolidated appeals from orders dismissing claims for property damage and business interruption losses resulting from the coronavirus and/or COVID-19. Policyholder lawyers can (and will) find fault with many parts of Wilson v. USI Ins. Service LLC, Case No. 20-3124, in which the Third Circuit tries to predict how the state supreme courts of New York and Pennsylvania would interpret the phrase “physical loss of or damage to property.”
The Wilson court distills the issue presented as, “whether the businesses’ inability to use their properties for their intended business purposes constitutes ‘physical loss of’ property.” In answering this question “no,” the Wilson court interpreted physical loss of property to require a “complete (or near complete) dispossession of the property, regardless of the purpose for which that property is used,” for there to be physical loss.
What this conclusion means to businesses that lease premises
This conclusion does little for business policyholders who rent space and commit resources towards a particular endeavor. According to Wilson, as long as the property has some function or use, there is no physical loss, even where the policyholder cannot, in whole or in part, conduct its chosen business due to the presence of a deadly virus or disease. In other words, as long an insured restaurant space can be used to, for example, store auto parts, in the court’s view, the policyholder has not been dispossessed of the property, and is not entitled to coverage. This interpretation is neither commercially reasonable nor in keeping with the expectations of policyholders who are tenants operating businesses in the buildings.Continue Reading Physical loss and reasonable expectations of policyholders: The Third Circuit whiffs
A concert promoter cancels a sold-out show of a world-renowned recording artist, reimbursing millions of dollars in ticket sales as a result. If the reason for the cancellation was COVID-19, does insurance cover that?
Event Cancellation Insurance Basics
Event cancellation insurance generally provides coverage only when there has been a triggering event under the policy. Some policies are written, for example, to only cover cancellations caused by rain or bad weather. Other event cancellation policies are all-risk policies, meaning that coverage may be triggered by any cause that is not specifically excluded. For all types of event cancellation insurance, the triggering event must have been fortuitous, or outside of the policyholder’s control.
Good News for Policyholders
The good news for policyholders is that many all-risk event cancellation policies do cover cancellations caused by COVID-19 related shut-down orders. For such policies, a shut-down order should qualify as a fortuitous triggering event. Across the United States, nearly every jurisdiction has enacted some kind of order that caused the cancellation of large-scale events.
Notes of Caution
Policyholders should be cautious concerning the scope of exclusions in respect of viruses and communicable diseases. Although these types of exclusions may bar coverage related to COVID-19, it is important to be mindful of variations in the exclusion language used. Some exclusions apply to only specific named viruses, such as SARS and MERS. Other exclusions contain carve-outs that may be applicable to COVID-19.Continue Reading COVID-19 event cancellation insurance – good news and bad news
Reed Smith Insurance Recovery partners John Shugrue, John Ellison, Amber Finch, Richard Lewis, and Matthew Weaver offer discussion and analysis on key issues relevant to businesses seeking, or evaluating whether to seek, coverage for COVID-19 losses. This webinar is available on demand and you can register here.
Here’s a brief summary of the topics addressed in the webinar:
Business interruption insurance provides coverage when physical loss or damage adversely impacts a business, causing it loss. This insurance covers lost profit and continuing expenses for the period needed to repair or replace damaged property and is designed to do for the business “what the business would have done had there been no loss or damage to property.” For COVID-19, the key issue for business interruption coverage is: Can the known or suspected presence of a virus cause “physical loss or damage” to property? For most businesses, it should generally be possible to make the requisite showing of physical loss or damage.
In commentary, insurance companies have raised a variety of exclusions as potentially barring coverage for COVID-19 related losses. Some of the exclusions raised include exclusions for virus, bacteria, contaminants, mold, and pollution. Although there is significant diversity in exclusion wording across property policies, many policies contain standard virus exclusion language promulgated by the Insurance Services Office (ISO). The ISO made demonstrably false statements to state regulators in seeking approval for this language. Accordingly, virus exclusions may be vulnerable to challenge. Additional information about insurers’ misrepresentations concerning virus exclusions is discussed in this article. Additionally, there are available challenges to the other forms of exclusion that insurers are raising that present viable responses to obtaining coverage even when they are asserted by your insurance company.
Directors and officers liability insurance (D&O) coverage typically applies to liability claims made against individual directors for breach of fiduciary duty and to claims made against the business for securities law violations. Potential claims implicating D&O coverage related to COVID-19 include shareholder claims for alleged failures to plan for, or respond to, the pandemic.Continue Reading Join us for an on-demand webinar “What policyholders really need to know about insurance for COVID-19”
Companies are facing operational and logistical challenges in recovering from the widespread destruction caused by these natural disasters. They will be looking to property damage and business interruption insurance to get them back on track. The time and cost to return to normal operations could be unusually long given the widespread destruction and the lack
Recently, the Commonwealth Court of Pennsylvania gave policyholders another victory in the continuing battle with insurers over application of the “multiple trigger” doctrine. In Pennsylvania Manufacturers’ Association Insurance Co. v. Johnson Matthey, Inc., the Commonwealth Court held that the multiple-trigger approach – which expands the number of policies potentially available to provide coverage for long-tail
Courts commonly observe that the purpose of Business Interruption or Business Income insurance is to put the policyholder in the same position it would have been in had there been no interruption. The Business Interruption inquiry is, thus, counterfactual. As such, for Business Interruption claims that go to trial, insurance companies and policyholders alike usually
We recently marked the two year anniversary of Superstorm Sandy. With that anniversary came an influx of litigation in response to insurance companies denying or overly limiting coverage. That litigation recently revealed highly questionable practices within the industry.
Continue Reading Potentially Fraudulent Insurance Company Practices Are Exposed In Superstorm Sandy Litigation