A New Jersey state court refused an insurance company’s claim that COVID-19-related losses are not covered under an optical shop’s business owner’s policy. Optical Services USA/JCI had filed a lawsuit against Franklin Mutual Insurance for not covering its operations expenses under its business interruption insurance when it was forced to temporarily close in March 2020 due to state mandates to stop the spread of COVID-19. As a result, the company suffered a significant financial loss that the owners believe the insurer should have covered, the New Jersey Law Journal reported.
Franklin Mutual denied the claim and then moved to have the complaint dismissed. The insurer argued that its business interruption insurance policies cover “fortuitous direct physical damage to or destruction of covered property by a covered cause of loss.” Thus, Franklin Mutual argued, the claim was rejected because there was no physical damage done to the establishment.
The court challenged this notion, asking the insurer to explain where in the policy there were “specific exclusions for an event such as this.” Franklin Mutual conceded that there was no specifically applicable exclusion.
Optical Services then responded that they “were forced to close their business because the executive order issued by the State … [and] across the country in emergency response to the pandemic found that there is a dangerous condition on plaintiffs’ property.” The business referenced a court’s finding of “physical loss or damage” in a case where ammonia gas was discharged into a facility corrupting the air inside and rendering the facility “temporarily unfit for occupancy.”
The court sided with Optical Services, finding that the business’s argument was viable and that the policyholders “should be afforded the opportunity to develop their case and prove the event of the COVID-19 closure may be a covered event under … Loss of Income, when occupancy of the described premises is prohibited by civil authorities.”
Business interruption insurance attorneys
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 multidistrict litigation (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. Please contact them if you have any questions or would like to discuss potential claims.