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As the COVID-19 pandemic forced shutdowns across the world, the hospitality business was amongst the hardest hit industries in terms of economic loss. In response, some hotels have filed insurance claims under their property and business income insurance in hopes of recuperating some of these losses. Courts are now tasked with evaluating the unprecedented issue of whether the effects of the COVID-19 pandemic are covered under the language of certain insurance policies. A New Jersey court recently dismissed claims brought by various hotel owners under numerous different insurance policies.
On October 5, 2021, the Superior Court of New Jersey granted a motion to dismiss in favor of multiple insurance companies dismissing plaintiff hotels’ claims for loss due to the COVID-19 shutdowns. The plaintiff hotels claimed “direct physical loss and damage,” loss of use, and a loss of ingress/egress. The Court opined that none of these claims provided coverage. The “direct physical loss and damage” provision did not apply ultimately because the COVID-19 virus did not cause any physical damage to the structure. The Court also found that the language of the relevant insurance policy did not provide coverage for “loss of use.” Finally, the Court decided that the loss of ingress/egress provision did not apply because the government shutdowns were not an adequate showing of impairment of the ingress/egress to the plaintiffs’ businesses.
The Court did leave some hope for the hotel claimants. In the lawsuit, the plaintiffs made claims under a “contagious disease” provision in one of their policies. The plaintiffs had not yet made this claim prior to presenting it in court. Therefore, the Court stated that the contagious disease claim should be dismissed without prejudice because the insurance company had not yet had the ability to evaluate and make a coverage determination on this claim. The Court noted that this coverage determination cannot be made based on the general shutdowns and emergency orders widely applicable to the State or country as a whole, but rather that each claim must be evaluated on an individual basis considering the specific circumstances relevant to each business and location.
You can read the Court’s full opinion here.
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