September 2021 Business Litigation Update

Insurance Company Does Not Have To Pay
For Claimed Business Losses

A Dallas federal judge recently ruled that a Texas insurance company is not required to cover property damage claims brought under an “all risk” commercial property policy where the insured claimed that COVID-19 caused her business to lose money.

In April 2020, a Minnesota dentist filed a class-action lawsuit against Aspen American Insurance Company, a Texas insurance company, for breach of contract and declaratory judgement.  The dentist claimed that COVID had damaged the property of her dental practice because it caused her to suffer business losses, as well as forced her to institute safety measures such as installing plexiglass shields, having patients wait in their cars instead of the waiting room, and implementing extra cleaning of exposed surfaces.  The dentist noted that several of her employees contracted COVID, and argued that this proved the presence of the virus contaminated her business property.

While courts have previously ruled that the presence of a foreign agent such as COVID can render a property uninhabitable or destroy functionality due to contamination, the Judge ruled in this case that COVID did not actually cause any physical damage or loss to the dentist’s business property – two points that were required by her policy.  Because the presence of COVID cannot cause physical damage to a structure, the Judge ruled that the insurance company is not required to cover the dentist’s claims of financial loss.

The bottom line: With COVID cases again on the rise, insurance claims will likely continue to come forward as businesses struggle with employee shortages, differing mandates regarding masks and vaccinations, and reduced economic activity.  This case highlights the critical importance of thoroughly reviewing and understanding your business’s insurance policies.  Business owners must have a solid understanding of what their policies cover and what is excluded, so they can make a covered claim when facing financial loss.