Missouri judge rules business owners can sue insurers over COVID-19 losses
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Missouri judge rules business owners can sue insurers over COVID-19 losses

A judge for the US District Court for the Western District of Missouri on Wednesday denied an insurance company’s motions to dismiss two cases in which businesses contended that business interruption insurance should cover COVID-19 losses.

Businesses in Missouri and Kansas claimed that COVID-19 caused a “direct physical loss” to their businesses. They filed suit against the Cincinnati Insurance Company, claiming that business interruption insurance should also cover a pandemic. This type of insurance usually covers losses when a business is halted because of direct physical loss or damage, which normally occurs from natural disasters such as fires and floods.

The Cincinnati Insurance Company contended that applying that coverage would result in crippling payouts and deplete capital. The company filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).

Judge Stephen Bough did not rule on the merits of the case on Wednesday, but he also did not dismiss the case. He found that COVID-19 was not a “benign condition,” and plaintiffs plausibly alleged that the particles that were a “physical substance” that attached to and damaged their property. Because of this, Bough denied the motion to dismiss. Hair salons and restaurants could sue their insurance carrier for business interruption losses from COVID-19.

Also on Tuesday, Bough declined to dismiss another case brought against the same insurance company. In K.C. Hopps, Ltd. v. The Cincinnati Insurance Company, the plaintiff also sought insurance coverage related to COVID-19 under an all-risk property insurance policy it purchased from the Cincinnati Insurance Company. The insurance company also filed a motion to dismiss in that case under Federal Rule of Civil Procedure 12(b)(6) on June 22. Bough, for “substantially the same reasons,” found that the plaintiff’s claims were “adequately stated” and denied the motion to dismiss.

This denial is in contrast to several other cases from the past few months. Insurers won similar cases in a Michigan state court, where a judge ruled that an insurance company was not required to cover its insured’s business interruption losses, and in the District of Columbia Superior Court, where a judge granted summary judgment to the insurance company.