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Missouri Court sides with Policyholders in “Business Interruption” Covid-19 Coverage Dispute

The COVID-19 Coronavirus pandemic has touched virtually every aspect of our lives. It is impossible to turn on a television, pick up a newspaper, or scroll through your social media feed without being bombarded with warnings, recommendations, and opinion pieces. Fortunately, in mid-August, Missouri business owners finally received some good news in response to the pandemic. The United States District Court for the Western District of Missouri issued an Order on August 12, 2020 denying an insurance company’s motion to dismiss claims filed by small business owners related to damages they suffered as a result of the pandemic.

A hair salon in Missouri and several restaurants in Missouri and Kansas filed suit against the Cincinnati Insurance Company following the denial of their insurance claims under the “physical loss” or “physical damage” sections of their “all-risk” property insurance policies. More specifically, the restaurants and salon filed claims under the following coverage sections of their policies:

(1) Business Income:

  • Loss of income due to the suspension of operations during a period of restoration.


(2) Civil Authority:

  • Loss of income due to a government order prohibiting access to the property.


(3) Ingress and Egress:

  • Loss of income due to the prevention of entering or exiting the insured’s premises.


(4) Dependent Property:

  • Loss of income due to the suspension of dependent property – essentially the inability to received necessary materials to conduct business – such as food products or hair products, and


(5) Sue and Labor:

  • Coverage for expenses incurred by the business to prevent further damage to their property.


Judge Stephen Bough focused on two critical key phrases – “physical loss” and “physical damage.” The businesses argued that the COVID-19 Coronavirus pandemic caused physical loss or physical damage because the virus, a “physical substance” that “lives on” and is “active on physical surfaces” and is “emitted into the air,” rendered their places of business unsafe and unusable, thereby resulting in damage to their property. The insurance company claimed their policies provided coverage only for income losses tied to physical damage to property, such as damage from a storm or a fire, and not for economic losses caused by governmental efforts to protect the public from disease.
The court, after apply several basic rules of insurance policy interpretation (affording coverage rather than defeating coverage if given a reasonable construction; applying the “ordinary person of average understanding” standard; resolving ambiguities in favor of the insured and against the author of the policy – the insurance company), found for the injured businesses on all five (5) coverage section claims.
While the order is only the first step in what could be a long and contentious trial – it simply denies the insurance company’s Motion to Dismiss the injured business owner’s claims during the discovery phase of the litigation – it represents an early win for businesses big and small that have been forced to minimize capacity, cease certain operations, or completely shut-down as a result of the pandemic. If you, a loved one, or a family friend owns a business and is curious about your coverage options related to the COVID-19 Coronavirus pandemic, give Call & Gentry Law Group a call. We would be happy to review your policy, discuss your options, and make sure you and your small business get the most out of your insurance coverage.