Since the outbreak of the COVID-19 pandemic, most insurers throughout the country have denied business interruption (BI) claims received from their policy holders based on the economic losses they have suffered as a result of the virus. Many insurers rely on specific language contained in their policies that exclude claims arising from losses due to viruses, bacteria or “contamination”. Even when such precise language is not included in the policies, insurance carriers throughout the industry have denied the claims based on their contentions that the claimed losses did not result from “property damage” because there was no physical damage to the structures or covered property.

Despite billions of dollars in losses claimed by businesses, the public sentiment supporting coverage and the outcry of private citizens, insurance regulators and many politicians, the demands that the government intercede to mandate that insurers cover these claims have largely been unsuccessful. Moreover, although litigation has been threatened throughout the nation, relatively few lawsuits have been filed in proportion to the number of potential claims. In the suits that have been filed, the presiding judges in all but a couple of cases have granted the defendant insurers’ motions to dismiss these legal actions. Most of the decisions support the insurers’ position that the claims are not covered because of the absence of some physical damage to the covered property.

In a suit pending in the Superior Court of New Jersey, Bergen County, the Hon. Michael N. Beukas recently denied Franklin Mutual Insurance Company’s motion to dismiss a lawsuit filed by Optical Services USA. In that case, Optical conceded that its business did not suffer “physical” damage i.e. a material alteration or damage but asserted that it suffered business income losses as a result of the state’s coronavirus quarantine and stay at home orders. During telephonic oral argument of Franklin Mutual’s motion to dismiss conducted on August 13, 2020, Judge Beukas stated that “the term “physical” can mean more than material alteration or damage.” Judge Beukas was receptive to Optical’s claim that it suffered a covered physical loss due to Governor Murphy’s Executive Orders and permitted the case to proceed. Significantly, Judge Beukas ruled that it is the insurer’s burden to prove that the claim is not covered.

Judge Beukas’ ruling is inconsistent with the rulings of many state and federal judges in other jurisdictions including Michigan, Texas, California, New York and the District of Columbia. In those cases, the jurists ruled that coverage is excluded unless the policy holder’s losses derived from some tangible physical damage to property. Judge Beukas’ decision is, however, consistent with another by the Hon. Stephen R. Bough of the United States District Court, Western District of Missouri issued in the class action suit, Studio 417 v. Cincinnati Ins. Co. Judge Bough denied Cincinnati’s motion to dismiss filed pursuant to FRCP 12(b)(6). A motion under this statute seeks a dismissal based upon the defendant’s claim that the complaint failed to state a cause of action upon which relief may be granted. In deciding such motions, the court is constrained to accept all allegations set forth in the complaint as true. In the Studio 417 case, Judge Bough gave policy holders hope when he ruled that the complaint, on its face, sufficiently stated a claim that may have merit. Significantly, Judge Bough emphasized that the policy by Cincinnati Insurance Co. did not include a virus or bacteria exclusion. He noted that the policy holders contend that the subject policies were “all risk” policies that provided coverage for economic losses due to a covered “physical loss or physical damage” and that the policies did not define the terms “physical loss” or “physical damage”. The Court was clearly receptive to the claimants’ arguments that a physical loss may be different than physical damage. He also was receptive to the viability of a claim that the coronavirus was physically present on the covered property. Although Judge Bough did not rule Cincinnati is required to cover the claimed losses in that case, he permitted the case to proceed.

Although Judge Beukas’ ruling provides hope and optimism for policy holders who have suffered business interruption losses as a result of executive orders, business owners should appreciate that his ruling may not have the precedential effect they hope for. In the Optical case, Franklin Mutual Insurance Company’s counsel apparently conceded that the virus exclusion in its policy does not apply. This contention is seemingly in contrast with the positions taken by most other insurers who have successfully argued that the unambiguous language of their policy exclusions must be strictly interpreted and enforced. That fact notwithstanding, discovery in the suit will proceed and the case will continue with discovery and possibly a trial. These facts potentially open the door for millions of business owners to seek recovery for their losses.

Questions concerning this publication, or the handling of COVID-19 claims should be directed to Kenneth S. Merber, Esq. who is a partner of Gallo Vitucci Klar, LLP and who is leading GVK’s COVID-19 Response Team at 201-683-7100 ext. 106 or kmerber@gvlaw.com.

In a unanimous decision, the First Department affirmed the Lower Court’s decision to grant Summary Judgment
in favor of GVK’s client, a construction manager. In this matter, the plaintiff, who was the foreman for the third-party defendant roofing subcontractor, alleged serious injuries as a result of a trip-and-fall over short, protruding steel rebar dowels that had been installed in the roof’s surface. The purpose of the rebar was to secure the concrete to the roof’s surface, after the area was waterproofed and the concrete was poured. The roofing subcontractor decided to discontinue use of orange safety caps on the rebar, because the caps interfered with the waterproofing process.

The First Department ruled in our client’s favor and affirmed the Lower Court’s decision in that plaintiff’s Labor Law § 241(6) claim was properly dismissed because the steel rebar was “an integral part of the work being performed”. The Labor Law § 200 claim was properly dismissed because the GVK client’s construction manager did not “exercise supervisory control” over the work of the subcontractors, and the construction manager did not direct
the subcontractors to stop using the orange safety caps on the rebar.

Gallo Vitucci Klar LLP is proud to announce that Taranae J. Hashemi has joined the ClaimsXchange Advisory Board along with Marina Barg Sr. Vice President, Claims at W. R. Berkley Corporation and Devina Joiner, JD Technical Director, E&S Specialty Claims at Nationwide.

ClaimsXchange connects innovative and collaborative professionals who share a passion for advancing the claims and litigation management industry and connecting with other talented and driven claims and litigation professionals. ClaimsXchange is designed to provide members with a unique space for meaningful new connections and alliances in a more intimate meeting format.

For membership information, visit www.theclaimsx.org.

On May 12, 2020, Kenneth S. Merber and Peter J. LoPalo obtained summary judgment and the complete dismissal of Plaintiff’s product liability claims suit filed in the Superior Court of New Jersey, Essex County.

Plaintiff alleged that she sustained serious physical injuries including burns after she was served a hot beverage from a Dunkin’ Donuts franchise. Plaintiff alleged the cup and/or lid were defective. She also alleged the various defendants were negligent. GVK’s client was a distributor for Dunkin’ Donuts franchises and was alleged to have manufactured the subject products and placed them into the stream of commerce.

Kenneth and Peter successfully defended the suit by demonstrating that their client was not a manufacturer of the subject cup and lid. They further proved that their client was entitled to the Product Seller Immunity Provisions under the New Jersey Products Liability Act, N.J.S.A. 2A:58C-9 and demonstrated that National DCP exercised no control over the design, manufacturing, packaging or labeling of the cup and lid, was not aware that the subject cup and lid could cause harm and did not create a defect that contributed to the subject incident.

It is with great sadness that we share that GVK partner Richard E. Weber, Jr. recently passed away.  Richard was a much loved colleague and friend and he will be sorely missed.

GVK has created a GoFundMe Memorial Fundraiser to help support his family during this difficult time.  We are grateful for any support you are able to provide.

Please click here to visit Richard’s page.

On March 26, 2020, Hon. Norman St. George, Administrative Judge for the 10th Judicial District, Nassau County, issued a memorandum detailing plans for establishing Virtual Courthouses throughout the State of New York. This plan is being implemented at the direction of Chief Judge DiFiore. The
Courts in NYC are scheduled to commence their Virtual Courthouse by the beginning of next week, and the Courts outside of the City, including Nassau County, by the end of next week.

Virtual-Court-Memo-03-26-2020.pdf

The Courts in NYC are scheduled to commence their Virtual Courthouse by the beginning of next week, and the Courts outside of the City, including Nassau County, by the end of next week.

Gallo Vitucci Klar LLP and Themis Advocates Group law firms across the country authored this legal alert as a guide and overview on issues related to COVID-19.

Federal

  • The U.S. Senate on Wednesday, March 18, 2020 passed legislation aimed at providing economic relief from the coronavirus pandemic that also includes extending liability protections for makers of face masks. https://nypost.com

Essential Service Providers

  • Many states have required that providers of electric, gas, water, telephone, cable, VOIP, internet service, and deliverable fuel services be prohibited from disconnecting or discontinuing service for non-payments for the duration of the State of Emergency (including Indiana, New Hampshire, Oregon). Example order: https://www.governor.nh.gov

Evictions and Foreclosures Prohibited

  • Many states have also barred evictions and foreclosure proceedings for varying periods of time (including California, New York, Massachusetts and Washington).
  • On March 17th, the National Low-Income Housing Coalition issued recommendations to Congress including a “national moratorium on foreclosures, evictions and homeless encampment sweeps.”
  • U.S. Rep. Maxine Waters, D-Calif., who chairs the House Financial Services Committee, proposed a national eviction ban. https://financialservices.house.gov
  • Related, the Department of Housing and Urban Development, issued a 60-day moratorium on foreclosures for homeowners unable to pay federally backed mortgages. https://www.washingtonpost.com
  • Given social distancing requirements, states are extending the validity of driver’s licenses and vehicle registrations set to expire on or after March 1, 2020 (Indiana, Tennessee, Oregon).

Business Forbearance and ATM Fees

  • New York has prohibited banks from refusing to grant a forbearance to any business who has a financial hardship as a result of the pandemic for a period of 90 days, is requiring that applications for forbearance be made widely available for consumers, and has directed that service fees for ATMs be lifted during the period of the emergency (all in Executive Order 202.9, effective March 21, 2020)

Paid Leave to Employees

  • The Family First Coronavirus Response Act which goes into effect on April 2, 2020, as passed for those employers with 500 or fewer employees. Significant provisions include:
    • Twelve weeks of paid job protected FMLA leave after the first 14 days. For those first 14 days, employees may use accrued personal or sick leave, but cannot be required to do so.
    • Will expire December 31st, 2020.
    • The law does not pre-empt state or local sick leave, meaning that whatever is most generous prevails.
    • The employee may use the leave for COVID-19 requirements or recommendations, the care of a family member based on their requirements or recommendations, or for a child whose school has shut down.

Waiver of FMCSA Rules for Emergency Relief Efforts

  • The Federal Motor Carrier Safety Administration (FMCSA) decided to waive certain hours-of-service, parts and accessories and other regulations in response to COVID-19.
  • Drivers who are involved in emergency relief efforts are not subject to hours of service. This is the first time the agency has issued national, as opposed to regional, emergency relief from Federal Motor Carrier Safety Regulations.
  • These exemptions will remain in effect until the termination of the emergency or April 12. There are specified categories of goods that fall under the category of emergency relief efforts. https://www.ttnews.com

INSURANCE AND COVERAGE RELATED NEWS AND ORDERS/LEGISLATION:

Below is an update as to regulations, litigation and news specifically related to insurance and potential coverage related to the COVID-19 pandemic.

  • The Oceana Grill in New Orleans filed what is believed to be the first declaratory judgment action against an insurer seeking business interruption and/or civil authority coverage for COVID-19 losses.
  • It asserts that coverage exists because its policy: (1) covers all risks unless excluded; (2) does not specifically exclude coverage for losses from a virus or global pandemic; and (3) covers “direct physical loss and/or from a civil authority shutdown due to a global pandemic virus.” The Grill asserts that COVID-19 satisfies the latter element because it is physically impacting private property and physical spaces by remaining viable on surfaces which then require cleaning and fumigating due to the intrusion of microbials, resulting in a direct physical loss needing remediation. The complaint claims that any argument by the insurer to the contrary would be a fraudulent misrepresentation that could endanger policyholders and the public. https://www.wwltv.com
  • Indiana has instituted a 60-day moratorium on cancelation of all insurance policies for non-payment of premium, though policyholders are still required to make payment.
  • The Indiana Department of Insurance noted in a press release that liability insurers for childcare facilities cannot cancel or limit coverage for staying open during COVID-19 without filing an endorsement change with the IDOE and that the department “will aggressively support those facilities if their commercial insurance carrier attempts to deny liability insurance without approval.” https://calendar.in.gov
  • Massachusetts’ Department of Insurance posted a link to its website encouraging Massachusetts residents to read NAIC guidance encouraging travelers to read their travel insurance policies because COVID-19, as a “known event,” likely will not trigger benefits under the policy. That NAIC guidance can be found here: https://content.naic.org.
  • The New Jersey legislature is already discussing a statutory way to shift these losses to the insurance industry. A bill was introduced on March 16, 2020 and remains subject to revision. If it passes it would certainly be challenged by the insurance industry on constitutional grounds. Tracking: https://legiscan.com/NJ/bill/A3844/2020. The bill – New Jersey Bill A-3844 – provides a framework for businesses that have business interruption losses due to the pandemic. If enacted, it will be retroactive for any insured with a business interruption policy in place from March 9, 2020, when New Jersey Governor Phil Murphy first declared a public health emergency and a state of emergency due to the virus. It would apply to New Jersey businesses with less than 100 eligible employees, meaning full-time employees working a normal week of 25 hours or more.
    • Several domestic insurers have been pressured regarding business interruption coverage. Eighteen members of the House of Representatives wrote to the leaders of the American Property Casualty Insurance Association, the National Association of Mutual Insurance Companies, the Independent Insurance Agents & Brokers of America, and the Council of Insurance Agents and Brokers. Insurer representatives responded and confirmed that business interruption policies were not designed to provide coverage against communicable diseases. https://www.insurancejournal.com
  • The New York Department of Financial Services has indicated doubt that a stay-at-home order or closure of business due to COVID-19 would trigger business interruption coverage.
  • The Vermont Department of Financial Regulation has posted its own guide to Business Income Insurance at: https://dfr.vermont.gov. Vermont has also encouraged carriers to be flexible with premium payments and directed health insurers to suspend all provider audits. https://dfr.vermont.gov/about-us/covid-19

BUSINESS AND COMMERCE NEWS AND LEGISLATION RELATED TO COVID-19

Below is an analysis of the negative economic impact of COVID-19 and the measures being taken federally and locally to combat such negative impact on the United Stated economy.

  • National Economic Council Director Larry Kudlow stated an economic stimulus package to fight the virus will total more than $2 trillion (which is approximately 10% of the U.S. economic output.
  • St Louis Federal Reserve President James Bullard has warned that the U.S. economy could take a $2.5 trillion hit, and that unemployment could hit 30%.
  • The U.S. federal government is still working to put together an economic aid packages (as Democrats warned the proposed measure voted on Sunday evening did not do enough to help workers).
    • The Small Business Administration is making disaster assistance available to businesses and non-profits. This assistance can extend up to $2 million in support, including low interest loans over a 30-year period. To apply online, businesses can go to: https://disasterloan.sba.gov/ela.
    • In Massachusetts, Unions have also taken steps in response to COVID-19. For example, some municipalities have placed a moratorium on construction. The Mass Building Trades Association has established best practices for building trades unions and construction in general: https://massbuildingtrades.org/coronavirus-best-practices/
    • Cannabis lobbying groups are warning that the coronavirus pandemic and restrictions on movement and commerce could be a boon to illicit dealers peddling unsafe products, which they said underscores the need for governments to ease access to legal marijuana amid the crisis.

LITIGATION/CIVIL JUSTICE SYSTEM UPDATES AND ORDERS:

To address the spread of COVID-19 Courts have been suspending proceedings, have court closures and in some more states have suspended the statute of limitations. Finally, we highlight notable COVID-19 litigation not specifically related to insurance.

Courts have suspended proceedings for various periods of time:

  • Alabama: State courts have suspended all in person activity, hearings, and appearances for 30 days.
  • Alaska: All state civil jury trials and hearings cancelled/postponed until May 1, 2020.
  • Arizona: All state trials suspended until May 1.
  • Arkansas: All in person proceedings in state court suspended until April 3, 2020.
  • California: Courts are suspending state proceedings on a county by county basis. Most counties have suspended all non-emergency proceedings until further notice.
  • Colorado: State court trials suspended through April 3, 2020.
  • Connecticut: All state civil trials are postponed until further notice.
  • Delaware: Court facilities are closed to the public until April 15, 2020.
  • Florida: Courts are suspending state proceedings on a county by county basis.
  • Hawaii: All state trials suspended until May 1, 2020.
  • Idaho: All state trials suspended through April 10, 2020.
  • Illinois: State courts have taken a county by county approach. The federal courts have suspended trials between now and April 3, 2020 (Northern District) and May 18, 2020 (Central District). The Southern District provides that all civil matters are continued generally pending further order from the Court.
  • Indiana: Federal civil trials continued until at least May 1, 2020. Counties have adopted policies suspending state trials on a county by county basis.
  • Iowa: All state civil trials are reset to a date no earlier than April 20, 2020.
  • Kansas: State courts are closed without further notice.
  • Kentucky: All state civil trials are postponed until further notice.
  • Louisiana: All state civil trials are reset to a date no earlier than April 14, 2020.
  • Maine: State trials are suspended until at least May 1, 2020.
  • Maryland: Federal trials postponed through April 24, 2020. State civil hearings and trials postponed through April 3, 2020.
  • Massachusetts: In state court, all trials, in both criminal and civil cases, are postponed until no earlier than April 21, 2020. In federal courts all trials scheduled to begin before April 27, 2020 have been continued.
  • Michigan: All non-emergency proceedings have been suspended in state court until April 3 if they cannot be conducted remotely.
  • Minnesota: State civil trials suspended until April 22, 2020.
  • Mississippi: State court judges can postpone any trials through May 15, 2020.
  • Missouri: State courts are closed until April 3, 2020.
  • Montana: State courts are suspending proceedings on a county by county basis, but the Montana Supreme Court has recommended resetting all trials through April 30, 2020.
  • Nebraska: State courts are closing on a county by county basis as they see fit.
  • New Hampshire: All in person proceedings suspended through April 6, 2020 in state courts, and trials suspended for 30 days from March 13, 2020 (with some exceptions).
  • New Jersey: All federal civil trials scheduled before April 30, 2020 are continued. State courts have postponed in person proceedings until further notice.
  • New York: In the Northern District Court of New York, all trials through April 30, 2020 have been continued. In the Western District Court of New York, all civil trials are continued for 60 days from March 13, 2020. In the Eastern District Court of New York, all trials before April 27, 2020 are continued until further notice. In the Southern District Court of New York, all trials scheduled to begin between March 16 and April 27 are continued until further notice. State courts have postponed all non-essential matters until further notice. NO filings of any kinds except for exempt emergency matters.
  • North Carolina: State courts civil proceedings are suspended until at least mid-April 2020.
  • North Dakota: All state civil trials are reset to a date no earlier than April 14, 2020.
  • Ohio: State court non-emergency hearings are cancelled for 30 days. All foreclosures are stayed for 30 days.
  • Oklahoma: From March 15, 2020, all state jury service cancelled for 30 days and cases continued to the next docket.
  • Oregon: State courts are suspending proceedings on a county by county basis. Most have suspended trials through April 30, 2020.
  • Pennsylvania: State courts are fully closed through April 3, 2020.
  • Rhode Island: All state civil trials continued until after April 17, 2020.
  • South Carolina: All state civil trials are postponed until further notice.
  • Tennessee: All in person proceedings suspended through March 31, 2020 in state court.
  • Texas: State courts are suspending proceedings on a county by county basis.
  • Vermont: State court non-emergency trials and hearings are suspended until April 15, 2020. Further, the Supreme Court can decide appeals without argument.
  • Utah: All state court non-essential hearings are delayed and must transition to video proceedings. Trials are not suspended, but COVID-19 precautions must be taken.
  • Virginia: All non-emergency proceedings have been suspended through April 6, 2020 in state courts.
  • Washington: State court civil trials are suspended until April 24, 2020, with extension possible as required by continuing public health emergency.
  • Washington, D.C.: All hearings and trials through May 15, 2020 are continued.
  • West Virginia: All state civil trials continued until after April 10, 2020
  • Wisconsin: Wisconsin state courts have taken a county by county approach. Most have continued hearings and trials presently scheduled for at least the next three weeks.

A handful of states have also suspended the statute of limitations for claims:

  • Massachusetts: All statutes of limitations are tolled through April 21, 2020.
  • New York: Executive Order 202.8 provides that any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, are tolled through April 19, 2020. This applies to time limitations with respect to the Criminal Procedure Law, the Family Court Act, the Civil Practice Law and Rules, the Court of Claims Act, the Surrogate’s Court Procedure Act, and the Uniform Court Acts, and any other New York rules or regulations.
  • Oklahoma: All civil statutes of limitations are tolled through April 25, 2020.
  • Washington, D.C.: Statutes of limitations tolled through May 15, 2020.

Notable suits related to COVID-19:

  • In the Eastern District U.S. District Court for Eastern Pennsylvania, the first case against a bio-tech firm related to Coronavirus has been filed (McDermid v. Inovio Pharmaceuticals, Inc., et al., No. 2:20-cv-01402). The case alleges that Inovio made misleading statements about the company’s development of a purported vaccine for the novel coronavirus, artificially inflating the company’s share price and resulting in significant investor losses.
  • In Douglas v. Norwegian Cruise Lines, (No. 1:20-cv-21107 (S.D. Fla.)), an investor’s proposed class action has accused Norwegian Cruise Lines of inflating the stock prices through false and/or misleading statements made by the company about the coronavirus outbreak. Further allegations relate to supposedly false internal communications as well as external reports regarding assurances about the pandemic. The class would include anyone who acquired Norwegian stock on the NYSE from Feb. 20 through March 12.
  • In Weissberger v. Princess Cruise Lines Ltd., No. 2:20-cv-2267 (C.D. Cal.), passengers have filed suit claiming that the cruise line put them in danger by allowing them to board a ship after it learned that passengers on a previous cruise on the same ship had shown coronavirus symptoms.
    • In a class action against a foreign government, four U.S. citizens have alleged that the Chinese government knew of the virus yet covered it up for their economic self-interest and caused injury and incalculable harm to the plaintiffs. Alters v. People’s Republic of China, No. 1:20-cv-21108 (S.D. Fla.).
    • There have been false advertising claims against a hand sanitizer manufacturer filed in California. David v. Vi-Jon Inc., No. 20cv-0424 (S.D. Cal.). There, plaintiffs allege that defendants made false and misleading advertising statements regarding the medicinal and virus preventative benefits of their hand sanitizers.

Consistent with The Governor’s March 20, 2020 Executive Order suspending the Statute of Limitations in New York, The Chief Administrative Judge yesterday issued a separate order advising that Courts are not to accept any papers or e-filings of any kind.  This would include all pleadings, motions, stipulations, notes of issue or any other court filings on matters handled by the firm.

Plaintiff, a 46-year-old union maintenance worker alleges that she was caused to slip and fall on soap in a bathroom for which she was responsible to clean.  As a result of the accident, plaintiff alleged multiple injuries, the most significant of which was a cervical herniation with radiculopathy for which she underwent a fusion procedure.

Plaintiff was in the process of cleaning the bathroom at the time of the accident. We represented the building management company which had no relationship to plaintiff or plaintiff’s employer. After trying for years to settle the case for litigation costs without any response from plaintiff’s counsel, at the conclusion of discovery we filed a motion for summary judgment seeking dismissal on multiple grounds, including that plaintiff is barred from maintaining a cause of action because she was injured cleaning the very condition she was hired to remedy. We also moved for dismissal under Espinal.

During the pendency of the motion the parties conferenced with the Court regarding settlement. Plaintiff’s counsel advised there was a workers’ compensation lien in excess of $200,000 and that his client was looking for fair compensation to allow her to repay the lien and compensate her for the fusion procedure and 16 years of lost union wages and benefits.  Knowing the strength of the motion, we viewed settlement as nuisance value and indeed, after oral argument, the Court dismissed plaintiff’s Complaint, citing both of our arguments as the basis for its decision.

GVK Partner Matthew Levy obtained summary judgment in Supreme Court, New York County, on behalf of a residential building owner and managing agent before the Preliminary Conference and before any depositions.

Plaintiff claimed that she was injured when a falling branch from a tree located on the sidewalk struck her.  Plaintiff sued the abutting building owner and managing agent in addition to the City of New York and New York City Department of Parks and Recreation. Prior to the commencement of the lawsuit, the plaintiff gave sworn testimony at a 50h hearing in which she testified how she was struck by the falling tree branch.  This testimony was used in support of the motion.

We argued that building owners do not have a duty to maintain the trees or tree wells located on the sidewalks abutting their buildings pursuant to NYC Administrative Code 7-210.  We further argued that the New York City Department of Parks and Recreation is responsible for the “planting, care and cultivation of all trees” pursuant to NYC administrative Code 18-104.  Plaintiff’s counsel and the City of New York opposed the motion by arguing that the motion is premature.

The motion was granted by Justice Verna Saunders on January 24, 2020.  The Judge agreed that the New York City Department of Parks and Recreation has exclusive jurisdiction of the planting, care and cultivation of the trees.  The Judge did not believe that the motion was made prematurely.