An Alabama shoe company seeking COVID-19 loss coverage has asked a federal judge to reject a bid by its insurer arguing that the company’s business interruption claims are invalid because its losses were not the result of physical damage.

Wagner Shoes of Tuscaloosa sued Auto-Owners Insurance Co. in April after the insurer refused to cover its claim for economic losses caused by the COVID-19 related shutdowns. The company argues that its business interruption policy with Auto-Owners provides no definition of direct physical loss or damage.

As for undefined or ambiguous language in insurance policies, Alabama courts have routinely held that unclear terms must be read in the policyholder’s favor, Wagner argues, according to Law 360. Accordingly, Auto-Owners cannot reject Wagner’s claim on the basis that its retail locations were not physically damaged or altered by the virus.

The insurer’s policy also maintains that “direct physical loss does not mean business losses occasioned by civil ordinance,” and that even if the virus was present in Wagner’s stores, it didn’t cause physical harm because it could be cleaned off.

Auto-Owners and Wagner tussled over the interpretation of what amounts to physical damages. Auto-Owners says that legal precedent in Alabama shows that physical damage requires an alteration of tangible property. Wagner argues that isn’t the case.

Auto-Owners has “artfully taken lawful case statements and tacked on their own finding Alabama requires a physical, structural, tangible alteration to constitute property damage when there is no Alabama case that says any such thing,” Wagner’s motion says, according to Law 360.

Because Wagner’s business suffered economic losses due to the COVD-19 pandemic, its business interruption occurred “from a covered cause of loss” under the language of the insurance policy, the company maintains.

Wagner says Auto-Owners denied its claim the same day it provided proof of loss, thereby breaching its obligation to investigate and evaluate the claim before deciding whether it was valid as the policy requires.

Has your business interruption claim been denied?

Beasley Allen lawyers are actively investigating and filing claims against various insurance companies for denial of business interruption coverage during the COVID-19 pandemic, and are involved in advocating for consolidation of these actions in an MDL. Dee Miles, head of our Consumer Fraud & Commercial Litigation Section, Rachel Boyd, and Paul Evans, lawyers in the Section, are spearheading this litigation for our firm and are monitoring all MDL developments as they arise.

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