July 20, 2022

Insurance: Another COVID-19 Business Interruption Claim Bites the Dust

Companies’ have been trying to recover some of their COVID-19-related losses by asserting claims under business interruption policies almost since the outset of the pandemic.  Those efforts generally have been unsuccessful, and now, according to this Gibbons blog, you can add New Jersey to the list of states whose courts have said “no dice” to pandemic-related business interruption claims. This excerpt discusses the decision, and notes that, like other courts that have rejected similar claims, the NJ court did so based on the lack of physical losses:

In a recent decision, the New Jersey Appellate Division held that six businesses were not entitled to insurance coverage for losses sustained when they were forced to close or limit their operations as a result of Executive Orders (“EOs”) issued by Governor Phil Murphy to halt the spread of COVID-19. This ruling follows the general trend nationally in which courts have rejected claims by insureds for business interruption losses incurred due to government orders related to the spread of COVID-19.

The decision arose from the consolidated appeals of six businesses that reported losses as a result of the EOs and sued their insurance companies, alleging they improperly refused to cover the plaintiffs’ insurance claims for business losses sustained due to the issuance of the EOs.

All six suits were dismissed with prejudice at the trial level pursuant to Rule 4:6-2(e) for failure to state a claim, because the plaintiffs’ business losses were not related to any “direct physical loss of or damage to” covered properties as required by the terms of their insurance policies. The Appellate Division affirmed all six dismissals and further concluded that the losses were not covered under “their insurance policies’ civil authority clauses, which provided coverage for losses sustained from governmental actions forcing closure or limiting business operations under certain circumstances.”

John Jenkins