Insurance industry representatives are closely watching legal actions in Missouri that are moving forward where it is claimed companies can sue for business interruption linked to COVID-19 shut down orders.
A federal judge in Kansas City ruled in favor of allowing an action taken by a number of restaurants to move forward to the discovery stage. Other actions are in play in St. Louis and other parts of the state.
While a number of cases claiming insurance policies should cover for losses caused by closures following the onset of the pandemic have been thrown out of court in other states, experts predict a number of actions in Missouri may develop and become highly significant.
“This is potentially huge,” Tom Baker, a professor of law at the University of Pennsylvania who has been following cases acrosss the country, told the Kansas City Star.
“My prediction is that this is not going to be the only case that is going to survive. This is a big deal.”
Three Kansas City area restaurants, Grand Street, V’s Italiano Ristorante and Trezo Mare Restaurant & Lounge, joined to sue their insurers, Cincannati Insurance Co., claiming that their "all risk" policies covered losses that followed the shut down.
Judge Stephen R. Bough, of the Western District of Missouri, ruled that the plaintiffs' case could move forward, denying a motion to dismiss on the basis that the restaurants had a viable, or "plausible" argument.
"We are starting to hear more and more talk about business interruption claims as this pandemic progresses," Brandon Koch, executive director of the Missouri Insurance Coalition, told the St. Louis Record.
"We are trying to educate people on business interruption, what it is and what it is not. For example, with fire damage where you are not able to open your business, and sell your products or services."
Koch added: "If a business is not able to bring their goods to market due to a particular event, then the business interruption will apply. But it needs to be physical injury or damage to property for that coverage to kick in."
Industry representatives argue that successful lawsuits on this issue would have a "catastrophic" effect on the way the insurance market operates.
The plaintiffs in this case, and others across the country, argue that the policies they have paid for cover loss of income where authorities bar or hamper access, if there are issues with suppliers, and all took steps to protect their properties from further damage.