“The Southern District granted summary judgment to the insurer, holding that the law firm could not satisfy the policy requirement to demonstrate that loss resulted from ‘direct physical loss or damage’ by a covered peril to property, which requires ‘some form of actual, physical damage to the insured premises.’ 17 F. Supp.3d 323, 331.
“The court ruled that coverage did not extend to loss incurred due to ‘the forced closure of the premises for reasons exogenous to the premises themselves.’ Id. at 331.”
Additional reading on this and other COVID-19 insurance coverage issues:
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Bill Wilson
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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America.
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the policy did not have acts of civil authority coverage. Your point is what exactly?
Assuming ISO language, for business income losses arising from loss to property on the premises by a covered peril, the coverage trigger is “direct physical loss.” IF there is civil authority coverage, some forms also require “direct physical loss” to property nearby while other forms require only “property damage” but also require prohibition to access to the “area” where the insured is located. What constitutes “direct physical damage” is a key issue in many, if not most, of these cases.
Hi Bill. Let’s examine the ISO form only. Actions of civil authority add coverage. Any action that causes a loss of income is covered except those actions involving virus or bacteria present on the premises. That is direct damage that caused the order and there is no coverage for that loss. However, if there is no presence of virus or bacteria at the premises there is coverage. ISO did not restrict acts of civil authority from providing coverage under the form. If we accept your interpretation then what additional coverage does acts of civil authority provide because you are basically requiring loss to the described premises. Assuming we are looking at special form policy the loss is deemed covered unless the insurer can demonstrate loss is caused by an excluded cause. Where the virus or bacteria has not caused physical damage to the premises that exclusion is inapplicable .
I don’t really understand anything you just posted. The primary business income coverage responds when there is “direct physical damage” to property at the described premises caused by a covered peril. Very few, if any, businesses have closed BECAUSE they can demonstrate direct physical loss.
Most businesses have been closed by order of civil authority, which brings us to that additional coverage in the policy form. This coverage is triggered by damage to property AWAY FROM the described premises caused by a covered peril. In ISO forms prior to 2007, this loss must be due to “direct physical damage,” just like the loss ON premises. Since that time, the only requirement away from premises is “property damage,” which is broader coverage than DIRECT PHYSICAL damage. However, the verbiage of this coverage was expanded significantly and now includes are requirement that the property damage occur within a mile of the described premises AND that the civil authority actually prohibits access to the AREA surrounding the described premises. For the most part, no civil authority order I’ve seen does this.
This is why there is likely little or no coverage for loss of business income, not to mention the fact that most policies have a 72-hour waiting period before coverage begins and most viral contamination (IF it is deemed direct physical damage) can be remediated within that time frame.
Of course, you never know what a court will decide, especially at the trial level.
Hi Bill sorry you could not understand my message
1. Under a special form policy the insured must only show loss. The insurer has the burden of proof to deny coverage for the loss sustained.
2. When acts of civil authority are endorsed onto the policy this is an additional cause of loss.
3. The act of civil authority has some limitations in what is covered. One of these is the treatment of an act by civil authority resulting from the presence of a virus or bacteria at the insured’s premises. If the insured has this and if it has caused damage to the insured’s premises then the loss is excluded regardless of what the civil authority does.
4. There is no limitation in coverage if the act of civil authority closes the business and there is no evidence of the presence of virus or bacteria.
5. there is a limitation of one mile that must sustain damage or coverage is excluded. If damage exists within that one mile then the act of the civil authority is covered even if the act of civil authority was for a pandemic. It is the act of the civil authority that triggered coverage not the virus or the bacteria. If the insured has damage by the virus caused by the virus or bacteria then there is no coverage. If the insurer fails to prove this then coverage applies unless the insurer can prove no damage within one mile of the premises.
6. Loss of use equals property damage when caused by the act of a civil authority unless there is no damage within a mile of the premises.
7. Area is not defined in the policy and this is probably why ISO put on a one mile restriction. Area can be defined as a region or part of a town, a country, or the world or the extent or measurement of a surface or piece of land.
8. Good luck to the industry trying to say there is no damage in the case of a pandemic where the local hospitals are overrun. the virus came from somewhere and the industry must show it did not come from within one mile of the insured’s premises or that the insured premises had teh virus and bacteria and they caused the damage to the premises. Both represent a virtual impossibility to prove.
To summarize act of a civil authority is an additional cause of loss. If the act is triggered by an excluded loss that has occurred on the insured’s premises the insured is not able to then overcome the exclusion. However, if the act denies access even for an excluded cause of loss the insured still has coverage for the resulting financial harm unless that excluded cause of loss is present and has damaged the insured;s premises. Do you follow me now?
1. Under a special form policy the insured must only show loss. The insurer has the burden of proof to deny coverage for the loss sustained.
No, the insured must prove that the insuring agreement is triggered. Simply having a loss doesn’t prove anything, as was illustrated in the court decisions following 9/11 business income claims. The insured, under the ISO CP 00 30, must demonstrate that there has been “direct physical loss.”
2. When acts of civil authority are endorsed onto the policy this is an additional cause of loss.
This coverage is included on the ISO CP 00 30 and it’s an additional COVERAGE not an additional cause of loss. The cause of loss that are required to trigger this additional coverage depend on the Causes of Loss form attached.
3. Don’t follow this. The order of civil authority coverage has nothing to do with the insured’s premises.
4. I have no idea what this means.
5. “If damage exists within that one mile then the act of the civil authority is covered even if the act of civil authority was for a pandemic. It is the act of the civil authority that triggered coverage not the virus or the bacteria….”
That is not correct. Read the ISO CP 00 30. The order must be in response to property damage caused by a covered peril. Regardless, this is not what precludes civil authority coverage for most insureds. It is either the requirement of “direct physical damage” or a prohibition of access to the AREA surrounding the insured premises.
Under a special form policy the insured must only show loss. The insurer has the burden of proof to deny coverage for the loss sustained.
No, the insured must prove that the insuring agreement is triggered. Simply having a loss doesn’t prove anything, as was illustrated in the court decisions following 9/11 business income claims. The insured, under the ISO CP 00 30, must demonstrate that there has been “direct physical loss.”
I am sorry Bill but you are incorrect. Under an all risk / special form policy the insured must claim financial harm. It is the insurance company that must demonstrate they did not incur the harm or did not have coverage under the policy. the burden is on the insurer not the insured.
Thanks for correcting me on civil authority being additional coverage. If acts of the civil authority only follow the property form then why did the industry copy the virus and bacteria exclusion and make it part of the additional coverage. If you want to send me the coverage form I will be happy to continue the discussion. ISO does not make them available. Thanks
Nope, while the burden is less stringent than the insurer’s, the insured must demonstrate that the insurance contract’s insuring agreement is triggered.
Insured’s Initial Burden of Proof on Coverage
https://www.irmi.com/articles/expert-commentary/burden-of-proof-in-coverage-litigation
The term “trigger” refers to the event that activates coverage under one or more insurance policies. See Allstate Ins. Co. v. Hunter, 242 S.W.3d 137 (Tex. App.—Fort Worth 2007, no pet.). Issues often arise in determining exactly what must take place during the policy period to trigger coverage. The insured bears the burden of proof to establish coverage, which includes whether the loss occurred during the policy period. See Gilbert Tex. Constr. LP v. Underwriters at Lloyd’s, London, 327 S.W.3d 118 (Tex. 2010). Therefore, the insured bears the burden to establish the event that triggers coverage under the policy period. The trigger of coverage depends on the wording of the actual policy at issue.
https://www.irmi.com/articles/expert-commentary/burden-of-proof-in-coverage-litigation-part-4
Insured Must Prove That Claim Falls Within Insuring Agreement
The burden is on the insured to bring the claim within the basic scope of coverage, and (unlike exclusions) courts will not indulge in a forced construction of the policy’s insuring clause to bring a claim within the policy’s coverage. The burden falls upon the insurer to phrase exceptions and exclusions in clear and unmistakable language.
http://zalma.com/blog/insured-must-prove-that-claim-falls-within-insuring-agreement/
When Words Collide: Resolving Insurance Coverage and Claims Disputes
Insuring agreements are what trigger and establish coverage in an insurance policy. The significance of that point is that, if an insuring agreement is not triggered, there is usually little point in exploring the policy any further. If an insurer denies a claim on the basis that the insuring agreement is not triggered and the insured cannot prove otherwise, then the dispute may end right there.
Insuring agreements are usually construed broadly in favor of an insured, though the burden of proof for the triggering of an insurance agreement usually falls on the insured.
Sorry Bill but your references do not apply to a special form type policy . It is well established in contract law that the burden of proof rests with the insurer not the insured on those policies. Your reference materiel is inapplicable for that reason. Your references also result from where the insurer has informed the insured there is no coverage or otherwise contested . When that happens the insured is required to demonstrate why the claim is covered. The insurer in these cases has presented evidence and argument in support denying that the policy has coverage.
Most liability policies ARE “all risk” policies. The insured always has the burden of demonstrating that an insuring agreement is triggered. Because they are usually very broad, that’s usually not difficult for most claims, but it is when you’re trying to say a virus causes “direct physical” damage to property.
We are discussing property coverage here not liability. Liability policies are not all risk or special or even comprehensive. The insured under a liability policy is charged with reporting the claim. Again it is the insurer responsibility to respond or deny or play the game of reservation of rights.
Direct damage by the virus to the insured’s property is not covered unless the courts over turn the exclusion. What is not excluded are acts of a civil authority. Those acts do not require direct damage at the insured’s location only direct damage within a one mile radius. The industry could have specifically excluded this but did not. Where does the policy exclude an act of the civil authority that closes the insured’s location where the subject of the act is excluded if direct damage is not present?
https://www.insurancejournal.com/news/national/2020/07/07/574497.htm
Bill We and the judges all agree there is no coverage for Red Virus at an insured premises. If there is direct damage there is no coverage because there is an exclusion for direct damage caused by a virus or bacteria. If it is indirect damage at the insured’s premises there is no coverage because there is no direct damage to the premises. Either way there is no coverage AT THE INSURED’S PREMISES!
Acts of Civil Authority does not change this. As it is subject to the same exclusions. If the insured has the virus at his location there is no coverage . However, acts of civil authority changes the dynamic of coverage at the insured premises for indirect loss caused by the act of the civil authority.
For instance, if the civil authority closes my place of business because there is a reasonable belief I have because they have closed another business within one mile of my premises and I sustain a measurable financial loss there is coverage because the loss is caused by their act not the virus. ISO restricted this grant of coverage to a premises that must have the subject of the order present within one mile of the insured’s premises.
Acts of civil authority govern people and safety. If the contagion is present elsewhere and caused the act for protection of people then there is no exclusion for my resultant loss under the form unless it occurs on my premises. That is why ISO restricted this to one mile.
Let’s change the subject to flood. Civil authorities issue an order forcing evacuation. Mt business is closed as a result. Flood does no direct damage within a mile of or to my premises. Is there coverage? No. Flood does occur and damages a premises within one mile but does not damage my premises. Is there coverage? Yes.
Remember Bill this is additional coverage and subject only to the exclusions as written. There is no exclusion for loss at my premises if another premises has the subject of the civil authority present and I am closed or restricted by the operation of that order. The policy limits this additional coverage grant to one mile.
Property removal coverage is all loss for 7 days. This additional coverage under civil authority is all loss if a loss is sustained within one mile of the premises.
Uh, OK.
Bill your hubris amazes me. Now you propose to speak for all the judges in this land as well as for the entire universe of insurance and risk. That is laughable and I am doubled over in mirth.
I am sorry but your hubris is leading to a fall. I am sorry but you also are wrong.
1. The insured need only report loss. The insurer must prove no loss or no coverage based on the contract. Do you follow me?
2. No judge has ruled on any case where the fact pattern is as I painted it. They have ruled there is no coverage on the insured’s premises because there is no direct damage or the loss has direct damage but the source is excluded. Do you follow me?
3. The policy provides Acts of Civil Authority as an ADDITIONAL COVERAGE. It applies the same exclusions verbatim for acts of civil authority directed at the INSURED’S PREMISES ONLY. There are no such exclusions applicable for off premises that cause your premises to be closed under the act of a civil authority. Or to put it simply these exclusions will not allow the additional coverage to circumvent them where AT THE INSURED’S PREMISES. Do you follow me
4. However, these exclusions only apply at the insured’s premises. Any Act of the Civil Authority outside of the limit of number 3 in this response is not excluded. Do you follow me
5. ISO put a restriction on this broad grant of coverage by limiting it’s application to require a premises within one mile of the insured’s premises having an occurrence covered by the act issued by the civil authority. This makes the Additional coverage of civil authorities similar to removal coverage. The later is restricted to seven calendar days. Acts of Civil Authority are restricted to an occurrence within one mile. Do you follow me?
6. Show me any wording that restricted this grant of coverage. There is none and you above all should know that. Do you follow me?
7. If I am so wrong then why has the industry file a bill for a bailout from these losses in Congress just as it did in 911? Just another example of rabid pigs moving to the government trough and my financial pocket. The stench makes me wrench. Fascism is always very ugly and that is all this is. Do u follow me?
8. When or if you can overcome your hubris and actually dialog again I will be happy to continue the discussion. I will not hold my breadth. Thank you for conceding that my analysis of the trigger of coverage and the industry damn well knows it. And I suspect you do too but it might impact you negatively financially if you quit carrying their water. Any plaintiff attorney that wants their client to have his losses paid under the insurance policy need only contact me to serve as an expert witness.
I think Bill you have spent way too much time around teh Big Idiots Association and that has seriously damaged your cognitive reasoning ability. Big I means stands for Big Idiots. Oh and the proof is they can not define the word insurance correctly or understand who is their master. I need write no more in support of my statement as fact. Thanks.
“Bill your hubris amazes me. Now you propose to speak for all the judges in this land as well as for the entire universe of insurance and risk. That is laughable and I am doubled over in mirth.I am sorry but your hubris is leading to a fall. I am sorry but you also are wrong….And I suspect you do too but it might impact you negatively financially if you quit carrying their water….I think Bill you have spent way too much time around teh Big Idiots Association and that has seriously damaged your cognitive reasoning ability. Big I means stands for Big Idiots.”
Your statement borders dangerously on defamation. I suggest that you take your bizarre opinions and accusations to another blog. Your ability to comment on this blog ends with this thread.
“It is axiomatic that the burden of proof rests upon the party claiming coverage under an insurance policy. While the insured bears the initial burden of demonstrating coverage, the insurer carries the burden of establishing the applicability of exclusions.” – Borsheim Builders Supply, Inc. v. Manger Ins., Inc., 917 N.W.2d 504 (N.D. 2018)