(LexisNexis)
In Franklin EWC, Inc. v. Hartford Fin. Serv's Grp., Inc., No. 20-cv-04434-JSC, 2020 WL 7342687 (N.D. Cal. December 14, 2020) (Corley, USMJ), a U.S. Magistrate Judge found that Sentinel Insurance Company's attempt to add a "virus exclusion" to its Business Owner's policy was legitimate, that the language of the virus exclusion was unambiguous and so it should be applied in that case to exclude coverage for a Business Interruption claim.
None of the parties or their lawyers appear to have raised the issue of the insurance carrier's placement of the exclusion in that policy. The record in the case is on display in PACER. Volumes are revealed by reading the policy itself as in any case and in this case, by reading the policy on PACER.
By its own terms, the insurance policy at issue in that case added the purported virus exclusion "to Paragraph B.1. Exclusions of the Standard Property Coverage Form," in pertinent part. Franklin EWC, Inc. v. Hartford Financial Services Group, Inc., Dkt. No. 10-1 at p. 127 (N.D. Cal. Case No. 20-cv-04434-JSC).
The carrier added the virus exclusion with its own chosen label of Exclusion "i".
However, there already was an Exclusion i in the policy, a Pollution Exclusion. Franklin EWC, Inc. v. Hartford Financial Services Group, Inc., Dkt. No. 10-1 at pp. 47-48 (N.D. Cal. Case No. 20-cv-04434-JSC).
The Magistrate did not mention this, whether or not the parties and their lawyers ever mentioned it in this coverage case.
The identical policy language and policy arrangement were at issue in Urogynecology Specialist of Fla., LLC v. Sentinel Ins. Co., No. 6:20-cv-1174-Orl-22EJK, 2020 WL 5939172 (M.D. Fla. Sept. 24, 2020).
There, among other things in her opinion in that case, the District Judge pointed out that it appears to be ambiguous, that it does not seem logical, to classify a virus as a pollutant. By labelling the attempted Virus Exclusion as Exclusion i in an endorsement to the main policy, the carrier in that case was apparently writing an insurance policy that would exclude damage caused by the virus as damage caused by pollutants described in Exclusion i in the Coverage Form. See Urogynecology Specialist of Fla., LLC v. Sentinel Insurance Co., 2020 WL 5939172, at *4.
The arrangement of the policy forms and specifically the identification of the new "virus exclusion" with the policy's Pollution Exclusion gives rise to ambiguity. And it is axiomatic, as they say, that ambiguous insurance policies are construed against the insurance companies which drafted them in the first place.
Such was the case for several reasons in Urogynecology Specialist of Fla., LLC v. Sentinel Insurance Co.
More was the case in Urogynecology Specialist of Fla., LLC v. Sentinel Insurance Co., as well. The Court carefully pointed out in that case, that its interpretation of insurance coverage for losses caused in a pandemic was itself taking place in a pandemic:
Importantly, none of the cases dealt with the unique circumstances of the effect COVID-19 has had on our society—a distinction this Court considers significant. Thus, without any binding case law on the issue of the effects of COVID-19 on insurance contracts virus exclusions, this Court finds that Plaintiff has stated a plausible claim at this juncture. Plaintiff alleged the existence of the insurance contract, losses which may be covered under the insurance contract, and Sentinel’s failure to pay for the losses. These allegations, when read in the light most favorable to Plaintiff, are facially plausible.
Urogynecology Specialist, 2020 WL 5939172, at *4.
The Magistrate in the Northern District of California did not mention the context of her policy interpretation, she just applied what she and apparently the lawyers in the case saw as the majority view, and that ended the matter for them.
The pandemic has revealed many things. Who knew that interpreting insurance policies would be among the things revealed?
More of these revelations will be explored in a forthcoming ABA Tort Trial & Insurance Practice Law Journal (Spring 2021) article by Dennis J. Wall, Remedies in Business Litigation: Update on Business Income Losses in the Coronavirus Pandemic.
Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.
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