Nearly all the courts hearing COVID-related business-interruption coverage disputes around the country have ruled in favor of insurance companies, but some are hoping an upcoming appeal at the New Jersey Supreme Court will yield a different result.
The court agreed to hear an appeal in a case involving an Atlantic City casino that sought reimbursement for costs of the pandemic shutdown.
In light of the upcoming appeal, a federal judge in Camden, New Jersey, stayed proceedings in a separate business-interruption insurance case pending the outcome of the Supreme Court case.
Other Litigation on Hold
In a dispute between the operator of the Ocean Walk and several insurance companies, the justices will consider whether the presence of COVID-19 or state orders shutting down casinos caused a direct physical loss or damage to the subject property and if policy language excluding contaminations apply.
No date was set for a hearing.
The justices agreed to hear the case after a trial judge denied a motion by insurance company defendants to dismiss, but the Appellate Division reversed that ruling.
The Ocean Walk case drew the attention of attorneys for a hotel operator with its own suit against insurance companies over denial of business-interruption coverage.
In Icona Opportunity Partners 1 v. Certain Underwriters at Lloyd’s, London, U.S. Magistrate Judge Elizabeth Pascal on Monday granted the plaintiff’s request to stay the case pending the outcome of the Ocean Walk case at the Supreme Court.
The court granted the stay despite the wishes of insurance companies in the case.
“[A] stay of proceedings could simplify the issues in this case. The New Jersey Supreme Court has granted certification in AC Ocean Walk and will likely issue a decision that provides a single, definitive interpretation of the operative phrase ‘physical loss or damage’ in the novel factual context of COVID-19 business interruptions,” Pascal wrote.
‘No Way This Case Should Have Been Dismissed’
In the Ocean Walk case, the trial judge, Michael Winkelstein, an Appellate Division judge on recall who is temporarily assigned to Atlantic County Superior Court, said the plaintiffs made a sufficient showing to survive dismissal on their claim that COVID-19 damaged the casino’s premises, meeting the requirements for coverage in the policy language.
But the Appellate Division panel said the casino’s policies have a contamination exclusion that excludes coverage for the inability to use or occupy a property, and said COVID-19 is encompassed in the virus exclusion.
A case can be made that Ocean Walk is entitled to coverage based on the presence of COVID, but it seems unlikely that the Supreme Court will overturn the Appellate Division, said Eugene Killian Jr., an Iselin lawyer who represents policyholders in coverage disputes but is not handling any COVID-related litigation.
“I know most of these cases have been going against the policyholders, but I’m telling you as someone who deals in this area that there’s no way this case should have been dismissed at the pleading stage, no way,” Killian said. “Courts have misread the science. The virus is present in aerosol form. That made the properties unusable. That’s enough to constitute policy damage. The policyholder should have been allowed to engage in factual development as to whether the virus was present on their property at any point in time. Obviously, there’s been a diminution in the value of the building because you can’t let people in the building.”
But Killian’s not confident that the Supreme Court will rule for Ocean Walk.
“The way the courts are deciding these cases lately, they’re just saying all these other courts have said there’s no cause of action, so, clearly, there’s no cause of action. I hope the Supreme Court doesn’t do that,” he said. “We’ve had a more defense-oriented court for a few years now and I don’t have a lot of confidence at this point.”
In the Icona Opportunity Partners case, the plaintiff is a company owning hotels in Wildwood Crest, Avalon and Cape May, New Jersey. It represents a class of more than 100 hotel companies that claim that insurance companies breached the terms of policies issued to the Hospitality Risk Management Association.
The lawyer for Ocean Walk, Justin LaVella of Blank Rome, declined to comment on the upcoming Supreme Court hearing. David Roth of Wiggin and Dana, representing American Guarantee and Liability Insurance Co. in that case, did not respond to a request for comment, and Keith Moscowitz of Dentons, representing AIG, declined to comment.
In the Icona Opportunity Partners case, the plaintiffs are represented by Carella, Byrne, Cecchi, Brody & Agnello in Roseland, New Jersey. That firm’s Lindsey Taylor did not return a call. Nor did Christopher Myles of Fields Howell in Newtown, Pennsylvania, representing Lloyd’s of London.