Implications of Covid on Insurance Coverage as it Relates to BI Claims and Force Majeure Clauses

Perhaps since the very first executive order came out ordering businesses to close amid the early stages of the Covid-19 pandemic, attorneys have been holding their breath, waiting to see how Covid-19 would play out in terms of insurance coverage, especially as it relates to various policy provisions, including but certainly not limited to business interruption coverage claims.

The first verdict in the United States related to the issue of whether a commercial property insurance policy covers business interruption losses caused by the Covid-19 pandemic came down in Texas late September, with a jury issuing a $48.5 million verdict in favor of the Baylor College of Medicine.

This verdict, split into three categories of compensation ($42.8 million for business interruption, $3.3 million for extra expenses, and $2.3 million for research losses) resulted from the policyholder succeeding in showing that the facts of the case proved that the virus damaged its property.

Specifically, Baylor succeeded in arguing that its education, clinical, and research work required it to take measures to keep its facilities open in order to treat patients suffering from Covid-19 and other medical conditions, conduct clinical trials for Covid-19 treatments, and to evaluate the effectiveness of other treatment options for Covid-19.

This unique set of facts allowed Baylor to prove that the Covid-19 virus was physically present at its facilities for the entire policy period at issue. The categorization of whether Covid-19 caused damages as a question of fact means that we can expect many more such cases to survive the summary judgment phase of litigation and proceed to juries for a ruling.