Business Interruption Insurance & COVID-19 in West Virginia

In Uncork and Create, LLC v. The Cincinnati Insurance Company, U.S. District Court, Southern District of West Virginia, 2:20-cv-00401, Uncork and Create, LLC (“Uncork”) initiated a purported class action against the Defendants for breach of contract seeking to have its business interruption claim covered under its insurance policy when it was forced to shut down its operations due to the issuance of an Executive Order by Governor Justice for non-essential businesses. Uncork also sought declaratory relief from the Court that coverage existed under the policy.

Uncork had an All-Risk commercial property insurance policy with exclusions for a “loss” defined as “accidental physical loss or accidental physical damage.” The Policy included coverage for loss of business income during a suspension of operations, including a suspension sustained due to a civil authority prohibiting access to the premises. Uncork was shut down as a result of the Governor’s Order of March 23, 2020. Uncork notified Cincinnati Insurance Company (“Cincinnati”) of its business interruption and Cincinnati denied its clam on May 14, 2020 stating that the claim did not involve a direct physical loss at the Uncork’s premises.

Cincinnati filed a Motion to Dismiss asserting that the closure of a business due to the threat posed by COVID-19 did not constitute physical loss or damage. Cincinnati argued that COVID-19 harms people, not property. Siding with Uncork, the Court, relying upon other insurance coverage disputes related to the COVID-19 pandemic stated that the novel coronavirus had no effect on the physical premises of a business and that any recovery would be purely economic, without any accompanying repairs to the premises. Simply, the Court stated that even when present, COVID-19 does not threaten inanimate structures covered by property insurance policies, and its presence on surfaces can be eliminated by disinfectant. As routine cleaning, eliminates the virus on surfaces, there would be nothing for an insurer to cover.

Accordingly, Judge Berger held that the unambiguous terms of the insurance policy do not provide coverage for solely economic losses unaccompanied by physical property damage. Cincinnati’s Motion to Dismiss was Granted.