The COVID-19 pandemic has resulted in government officials in several states issuing orders that shut down businesses such as restaurants, bars, and casinos. Faced with closed operations and uncertain cash flow, these businesses have looked to their insurers to cover their losses. Policyholders have filed cases in Ohio, Illinois, Louisiana, California, Oklahoma, and Florida seeking recoupment of their business interruption losses. These courts will necessarily resolve key issues in the debate over whether the presence of COVID-19 on property constitutes property damage or direct physical loss. Below are some key cases to watch.

Mitchell Brothers Ice Cream, Inc. et al., v. The Cincinnati Ins. Co., Cuyahoga County Court of Common Pleas, Ohio, No. CV-20-931683 (Apr. 3, 2020). Mitchell Brothers Ice Cream, Inc. manufactures and sells ice cream in several locations in Northeast Ohio. Ohio’s Governor issued an order in connection with the COVID-19 pandemic that shut -down all non-essential businesses. As a result, Mitchell was forced to shut down all of the locations from which it sold ice cream to the general public and, furthermore, halt all operations except for manufacturing ice cream that it provided to grocery stores for re-sale. Mitchell submitted a claim under its property insurance policy which provided civil authority coverage for business income loss and extra expenses due to government action. The insurance company issued a reservation of rights letter, however, contending that Mitchell’s business interruption losses resulting from the COVID-19 pandemic were not due to a “direct physical loss” and thus not covered under the policy. Mitchell’s lawsuit seeks a determination that Mitchell suffered a direct physical loss from the COVID-19 pandemic. Mitchell alleges that due to the number of COVID-19 cases in Cuyahoga County, “it is probable that Mitchell’s insured locations have sustained direct physical loss or damage due to the presence of coronavirus, and has unquestionably sustained direct physical loss of and at those locations as a result of the Pandemic and/or civil authority orders issued by the Governor of Ohio.” See Compl. at ¶ 13.
 

Big Onion Tavern Group, LLC, et al. v. Society Ins. Inc., N.D. Ill. No. 20-cv-02005 (Mar. 27, 2020). The plaintiffs in this declaratory judgment, breach of contract, and bad faith lawsuit are owners and operators of several restaurants and movie theaters in Chicago, Illinois. Their businesses were shut down by an order issued by the Governor of the State of Illinois that aimed to contain the spread of the COVID-19 virus. Plaintiffs filed claims with their insurance company and the insurer responded with blanket denials. The denials were made “often within hours of receiving Plaintiffs’ claims” and “without first conducting any meaningful coverage investigation.” See Compl. at ¶ 5. In some of its denial letters, the insurance company argued that the “actual or alleged presence of the coronavirus” did not constitute “direct physical loss” and, thus, coverage under the policy was not triggered. The “all risk” property insurance policies at issue in this case provided coverage for losses resulting from occurrences, including the “necessary suspension” of business operations caused by a government order. See Compl. at ¶ 34. In addition, the policies stated that the insurance company agreed to “pay for actual loss of Business Income” that policyholders suffered “due to the necessary suspension” of the policyholders’ operations caused “by direct physical loss of or damage to covered property.” See Compl. at ¶ 39. Moreover, according to the complaint, the insurance company did not include an exclusion for loss due to virus or bacteria in the policies. The policyholders are seeking reimbursement of their business interruption losses, attorneys’ fees, prejudgment interest, and a declaration that the insurance company is obligated to pay the full amount of the business interruption losses.
 

French Laundry Partners, LP dba The French Laundry, et al. v. Hartford Fire Ins. Co., et al., Napa County Superior Court, California (Mar. 25, 2020). Plaintiffs own and operate two restaurants in Napa County and hold an “all risk” property insurance policy with Hartford that did not contain an exclusion for loss due to virus in it and, according to the complaint “actually extends coverage for loss or damage due to virus.”  Understanding that establishing a “direct physical loss or damage to covered property” would be critical in obtaining coverage, Plaintiffs allege that the March 18, 2020 order issued by the Napa County Health Officer that closed non-essential businesses specifically states that “it is being issued based on evidence to physical damage to property” and that “the deadly virus physically infects and stays on surfaces of objects or materials, ‘fomites,’ for up to twenty-eight days.” Plaintiffs’ declaratory judgment action seeks a declaration that the March 18, 2020 order triggers coverage and that the policy provide business interruption causes in the event that COVID-19 has caused loss or damage at the restaurants. Plaintiffs, however, specifically state that they “do not seek any determination of whether the Coronavirus is physically in the insured premises, amount of damages, or any other remedy other than declaratory relief” Compl. at ¶ 34.
 

Cajun Conti, LLC, et al. v. Certain Underwriters at Lloyd’s, London, et al. Civil District Court for the Parish of New Orleans. Cajun Conti LLC, the owner of a well-known restaurant in New Orleans, filed a declaratory judgment action against its insurer seeking a determination that the losses it suffered from the COVID-19 pandemic and resulting order from the Louisiana Governor limiting gatherings to a certain capacity are covered under its “all risk” property policy. The policy did not have a virus exclusion, but did include an exclusion for biological materials in connection with terrorism or other malicious use. In support of its claim that the insured property suffered physical damage, the policyholder stated that COVID-19 stays on the surface of objects or material for up to twenty-eight days and, in addition, pointed to the actions of China, Italy, France, and Spain who have “implemented the cleaning and fumigating of public areas prior to them re-opening due to the intrusion of microbials.” Compl. at ¶ 22.
 

Chickasaw Nation Department of Commerce v. Lexington Ins. Co., et al., Pontotoc County District Court, OK, No. CV-20-35 (Mar. 24, 2020) and Choctaw Nation of Oklahoma v. Lexington Ins. Co., et al., Bryan County District Court, OK, No. CV-20-42 (Mar. 24, 2020). The Chickasaw Nation Department of Commerce and Choctaw Nation of Oklahoma, two Indian Tribes in Oklahoma, filed declaratory judgment actions against several insurance companies arising from the shutdown of their casinos and other businesses to curb the spread of COVID-19. The policyholders sued under “all risk” property insurance policies for physical loss and damage, including business interruption losses, sustained as a result of COVID-19.
 

Prime Time Sports Grill, Inc. d/b/a Prime Time Sports Bar v. Certain Underwriters at Lloyd’s London, M.D. Fl., Tampa Div., No., 8:20-cv-00771 (Apr. 2, 2020). Prime Time operates a bar and restaurant in Tampa, Florida. It brought a declaratory judgment action against Lloyd’s seeking coverage under an “all risk” property insurance policy as a result of a March 17, 2020 order issued by Florida’s Governor that shut down all bars and restaurants. On March 17, 2020, Prime Time provided notice of its claim to Lloyd’s and sought payment of all benefits under the policy arising from the shut-down order. On March 23, 2020, Lloyd’s denied the claim. Prime Time is seeking a declaration that it is entitled to business interruption losses up to the policy limit.
 

Given the economic impact of the COVID-19 pandemic on businesses, potential insurance coverage available for income loss could be critical to the continued survival of the business. The rulings in these cases on threshold issues of whether COVID-19 claims constitute “direct physical loss” will likely be precedent setting and should be watched closely by policyholders across the nation.