A Georgia bankruptcy law firm sued its insurer last week seeking business interruption coverage for income it allegedly lost after courtrooms in the state were closed due to the COVID-19 pandemic. The case is Karmel Davis and Associates v. Hartford Financial Services Group, case number 1:20-mi-99999, in the U.S. District Court for the Northern District of Georgia.
In the proposed class-action suit the Douglasville, Georgia-based law firm argues that the coronavirus caused direct physical loss to its own office, triggering business interruption coverage under its policy.
Karmel Davis is seeking to represent a nationwide class of policyholders whose business insurance claims with Hartford were denied, whose insurance policies do not exclude viruses and who experienced business suspension due to civil authority orders during the pandemic.
In the suit, Karmel Davis claimed that Hartford is straining its credibility by stating that it is unaware of the statewide shelter order that implicates the civil authority coverage. The novel coronavirus can create physical damage because it can stay on a property’s surface for days, the firm added.The firm contended that COVID-19 does not trigger the pollution exclusion in the policy because “a virus is not a solid, liquid, gaseous, or thermal irritant or contaminant.”
In addition, the policy covers losses that result from damage to a “dependent property,” which for Karmel Davis includes bankruptcy courts that have closed or reduced services since government-ordered lockdowns began in March, the suit states.
“Plaintiff suffered an actual loss of Business Income due to direct physical loss or physical damage to the Bankruptcy Court (a Dependent Property),” the suit states.
In a statement, Hartford said: “Unfortunately, viruses are generally outside the scope of business interruption coverage due to the absence of any physical damage. These policies do not cover this exposure and, accordingly, premiums were never collected for it.”
Meanwhile, the policyholder in one of the first COVID-19 lawsuits to be ruled on has withdrawn its appeal. According to court papers, Social Life Magazine on Friday withdrew its appeal of a federal district court judge’s ruling that it was not owed coverage for coronavirus-related income losses.