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Business Interruption Claims Resulting from Wildfire Losses: What You Need to Know

by | Sep 8, 2023 | Featured, Natural Disaster Claims, News & Updates

As a result of the recent Lahaina wildfires occurring in Maui, Hawaiʻi, the question of what is covered under commercial property policies for business interruption claims has resurfaced.

Under most commercial policies, business interruption coverage is available to an insured whose business is closed as a result of a covered loss. Unfortunately, most policies require there to be direct physical loss or damage resulting in the closure of the business. For example, a fire destroying all or part of the business making it impossible for the business owner to operate.

During the Covid pandemic, hundreds of thousands of businesses around the world were closed due to governmental orders requiring businesses to shut down. As a result, billions of dollars arose from thousands of claims for business interruption coverage associated with these shutdowns.

Obviously, in the Covid context, businesses were shut down not necessarily as a result of direct physical damage, but rather by governmental order. As a result, coverage litigation ensued not only in the United States, but on a global basis in regard to these claims. Specifically, these Covid based lawsuits involved whether business interruption claims are viable as a result of a Covid governmental shutdown order. The vast majority of decisions worldwide found that there was no coverage for such shutdowns. Many insurance policies included business interruption coverage for closures resulting from governmental orders. Once again, however, most decisions from around the United States found that the governmental order had to be based upon a direct physical loss or damage to an adjoining property. Unfortunately, this resulted in there being no coverage. In addition, the final issue involved coverage for a partial suspension opposed to full suspension of the business. Specifically, certain commercial business policies provide coverage for a partial suspension. In other words, if the business is only partially suspended, there may be coverage available.

In regard to the Lahaina wildfires, a significant number of commercial buildings have been damaged or destroyed. In these situations, a business owner should have coverage for their business losses. Specifically, there is likely direct physical damage to the building. If the shutdown of the business is unrelated to a governmental order, the insurers will determine the amount of business interruption coverage owed based upon the income earned by the business and continuing expenses. Such claims are typically ascertainable through a review of a business’s financial records.

A more complicated issue involves how much time an insured may have to recover for business interruption. This is called the period of restoration. In other words, how long should it take for the business to be restored? In some policies, the period of restoration is defined as the shortest time necessary for a business owner to repair or relocate the business. However, there may also be a limitation as to the amount of time a business owner can collect on a business owner merchant claim. This is oftentimes limited to one or two years. In light of the very real possibility that restoration regarding the Lahaina wildfires will take more than two years, there is a significant potential for a number of business owners to find themselves in a situation where they will not have adequate business interruption coverage.

Even if the building has not been destroyed, an insured can still submit a claim for business interruption. For example, there are a number of businesses that have minor damage or that foreclosed as a result of governmental orders restricting access to the burn zone. To the extent there is any minor damage, there is still potential for coverage. By way of example, if there is smoke damage or exposure to hazardous materials, that type of damage may be sufficient to qualify as a direct physical loss or damage.

Moreover, if there is no damage whatsoever, the question will be whether the policy provides coverage for governmental shut down. Typically, in these instances the policy will say the insurer will provide coverage if there is damage to adjoining properties such that a local or state government has restricted access to the insured’s property. For example, if a neighboring building burns down and the insured’s business cannot reopen due to the business’s street being closed, there will be coverage. Accordingly, even though the insured’s building is arguably not damaged, there may still be coverage if the policy does provide coverage for the governmental order.

As a result of the above, here is what a business owner needs to know:

    • How long will my policy pay for business interruption?
    • What type of coverage do I have?
    • Do I have Governmental Order type coverage?

As always, if you have any questions regarding your insurance policy or any of the information provided above, please feel free to reach out to our office. Lether Law Group proudly employs attorneys who are born and raised on the islands of Maui, Oahu, and the Big Island. We are more than happy to provide you with guidance on understanding your specific policy coverages.

 

Hawaiʻi Wildfires: Understanding your Property Insurance Coverage

by | Aug 28, 2023 | Featured, Natural Disaster Claims, News & Updates

In light of the recent wildfires that have wreaked havoc across Hawaiʻi, Lether Law Group has received numerous inquiries from individuals seeking basic information on property insurance. The PDF  below will provide you with basic facts regarding homeowners, commercial, and rental insurance policies.

As a service to our Maui Ohana, we are providing this free information without any obligations. We are here to help you. If you do require formal legal assistance, please feel free to contact us.

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Hawaiʻi Wildfires and FEMA Assistance: A Guide from Lether Law Group

by | Aug 28, 2023 | Featured, Natural Disaster Claims, News & Updates

In light of the recent wildfires that have wreaked havoc across Hawaiʻi, Lether Law Group has received numerous inquiries from individuals, government agencies, and families seeking guidance on accessing/locating support. This guide is designed to address those questions by detailing the process to obtain assistance from the Federal Emergency Management Agency (FEMA). Given the high demand for such aid, it is imperative for applicants to be well-informed about the process and eligibility criteria. Being prepared with the necessary information streamline your application and secure the assistance you need mor efficiently.

What is FEMA?

The Federal Emergency Management Agency, or FEMA, is a vital resource for citizens and emergency personnel across the nation. Its mission is to prepare for, protect against, respond to, recover from, and mitigate all hazards, including wildfires. If you’ve suffered losses that are not covered by your insurance, FEMA may provide reimbursement.

Am I Eligible for FEMA Assistance?

Becoming eligible for FEMA assistance requires satisfying specific criteria:

    • Identity Verification: You must be a United States citizen, non-citizen national, or qualified non-citizen and have a valid Social Security Number.
    • Insurance Examination: It’s essential to understand that FEMA will not cover disaster-related needs if they are already covered by insurance or other programs.
    • Ownership or Occupancy Verification: You must confirm that the disaster-damaged home is your primary residence.

How Do I Apply for FEMA Assistance?

Applying for FEMA assistance is a process that takes approximately 20 minutes. Here’s how to get started:

  1. Prepare your Information: Gather your Social Security Number, annual household income, contact details, insurance information, and bank account details where the financial assistance will be deposited.
  2. Contact your Insurance Company: It’s advisable to speak with your insurance company to confirm your insurer and policy information. For more information on insurance documentation, click here
  3. Begin the Application: Start your application online at DisasterAssistance.gov OR use the FEMA mobile app.  If you need assistance with the application, call FEMA at 800-621-3362 (open 24 hours aday/7 days a week – Multilingual operators are available)
  4. Submit and Track your Claim: Once your claim is submitted, you can follow the provided instructions to track its status.

How Lether Law Can Help

Lether Law Group has specialized in large first-party property losses for over 35 years, including multiple large fire loss and wildfire claims. Thomas Lether is approved as a FEMA Regional Counsel and has experience in significant natural disaster claims.

If you have any additional questions regarding your insurance policy or any of the information provided above, please feel free to reach out to our office. Lether Law Group proudly employs attorneys who are born and raised on the islands of Maui, Oahu, and the Big Island. We are more than happy to provide you with guidance on understanding your specific policy coverages.

Washington Landlords and Tenants: Remaining COVID-19 Eviction Protections Lifted

by | Aug 23, 2023 | COVID-19, Decisions, Events, Featured, Misc., News & Updates

The National Response to COVID-19: A Brief Overview

In early 2020, the nation was in a state of emergency due to the COVID-19 pandemic. Recognizing the risk of mass evictions as a result of the pandemic, many state and local governments enacted a moratorium on residential evictions. These moratoria effectively denied landlords the right to pursue an unlawful detainer (eviction) action – the only legal means of removing tenants for failure to pay rent.

Washington State’s Eviction Moratorium and the ERPP Initiative

In Washington state, an eviction moratorium was in effect from March 18, 2020, through October 31, 2021. Following the end of the moratorium, the Washington state legislature passed E2SSB 5160 authorizing the establishment of an Eviction Resolution Pilot Program (ERPP) in any county in Washington state. The ERPP was designed to facilitate dispute resolution between landlords and tenants, by connecting them with a dispute resolution specialist and resources such as rental repayment assistance. Once the eviction moratorium ended on November 1, 2022, six counties in Washington state elected to participate in the ERPP: King, Pierce, Snohomish, Clark, Spokane, and Thurston. Each program established a local Dispute Resolution Center (DRC) and operated pursuant to a standing order issued by the local superior court.

Pursuant to the ERPP, landlords in participating counties were required to provide tenants with an ERPP Notice, advising tenants of their rights under the ERPP, and a proposed repayment plan for outstanding rent amounts owed. Upon receiving an ERPP Notice and proposed repayment plan, tenants had 14 days to negotiate a proposed settlement with their landlord via the local DRC. In circumstances where the landlord and tenant failed to come to an agreement during the 14-day period, or the tenant breached the agreement, the landlord was then authorized to send the tenant a 14-day notice to pay or vacate.

The End of ERPP and Its Impact

The ERPP ended by statute on July 1, 2023. Dispute Resolution Centers statewide reported that over 78,000 cases were closed and completed during the life of the program, and 73% of these cases closed because the landlord and tenant reached an agreement. Now that the program has ended, landlords are no longer required to provide tenants with an ERPP Notice or a proposed repayment plan before proceeding with an unlawful detainer for unpaid rent.

The end of the ERPP marks the end of all remaining COVID-19 eviction protections for tenants. However, some counties in Washington state still maintain permanent eviction moratoriums during parts of the year. In Seattle, City Council Ordinance 126041 creates a defense to eviction for tenants who would have to vacate their housing between December 1 through February 28 each year. Additionally, Seattle City Council Ordinance 126369 creates a defense to evictions for anyone in school, with children in school, or working at a school during the City of Seattle Public school year, which is generally the beginning of September through mid-June.

Need Legal Assistance? Contact Lether Law Group

Lether Law Group has attorneys licensed and actively participating in eviction proceedings in Washington state. To the extent that you have any questions about Washington landlord-tenant law or eviction moratoria, please feel free to contact us by phone at (206) 467-5444 or via email at info@letherlaw.com.

COVID-19 Business Interruption Case Law: The Western District of Washington Denies Plaintiffs’ Motions to Certify Questions to the Washington State Supreme Court

by | May 7, 2021 | COVID-19, Featured, Insurance Law, News & Updates

COVID-19 Business Interruption Case Law: The Western District of Washington Denies Plaintiffs’ Motions to Certify Questions to the Washington State Supreme Court

In February of 2021, Plaintiffs in 10 consolidated cases before the United States District Court for the Western District of Washington, including in Germack v. The Dentists Insurance Company, Cause No. 2:20-cv-00616, filed motions to certify questions to the Washington State Supreme Court regarding business interruption coverage for losses arising from the COVID-19 pandemic. The Plaintiffs’ group specifically sought to certify the following questions:

  • Does being physically deprived of the ability to use covered property directly as a result of the Governor’s shut-down orders constitute a “direct physical loss of” such property?
  • Does Washington’s efficient proximate cause rule require a factual determination of the predominant cause of an individual business’s loss, before a virus (or other) exclusion may be applied to bar coverage?

On April 23, 2021, Plaintiffs’ motion was denied. The Court began by noting the Plaintiffs’ argument that “the Washington Supreme Court has not yet addressed the question of whether COVID-19 and its resulting business closures and limitations causes ‘direct physical loss’ to an insured property,” and that the Court should defer to the Supreme Court to determine the issue. The Court rejected Plaintiffs’ argument in whole, noting that at least five other federal courts addressing similar issues have considered certification to their respective state supreme courts and found certification to be unnecessary:

This Court has at its command all the tools necessary to reach its decision, including the extensive briefing provided by the numerous parties in the consolidated cases on both questions Plaintiffs seek to certify.

Additionally, the Court found “several other strong federal interests weigh against certification,” including the constitutional provisions for diversity for out-of-state parties, the number of putative class actions filed under the Class Action Fairness Act of 2005, and the unjustifiable delay and expense that would be incurred if certification was allowed. The Court ultimately denied Plaintiffs’ motion for certification, finding that Plaintiffs’ questions “do not present such unique and exceptional issues as to warrant certification.”

Lether Law Group represents The Dentists Insurance Company in the Germack matter, which is designated as a national class action for dentists impacted by COVID-19. TDIC’s Motion for Summary Judgment on the coverage issue is currently pending before the Court as is a Motion for Dismissal of the Class Allegations.

Lether Law Group is also currently representing several other insurers in COVID-19 business interruption litigation in state, federal, and tribal courts in Washington, Oregon, California, and Pennsylvania amongst others. If you would like to discuss or have any questions about COVID-19 business interruption claims and/or litigation, please feel free to contact our office.

The above article is an opinion based on various resources such as industry knowledge and is not to be construed as legal advice or to be used as such. If you require legal advice or would like to inquire further about the information contained in this article, please feel free to contact our office directly.

COVID-19 Business Interruption Case Updates from Across the Country

by | Sep 11, 2020 | Decisions, Featured, Insurance Law

The rapid spread of COVID-19 throughout the United States and resulting governmental shut-down orders have sparked a large increase in business interruption claims and subsequent litigation. While “direct physical loss” and “necessary suspension” policy language have been addressed in most jurisdictions, the less commonly litigated terms of civil authority coverage and virus exclusions are the subject of debate in many courts across the country. The following is a summary of notable rulings on COVID-19 business interruption coverages:
  • In re: COVID-19 Business Interruption Protection Insurance Litigation, United Statees Judicial Panel on Multidistrict Litigation, MDL No. 2942, 2020 U.S. Dist. LEXIS 144446: The Panel denied the plaintiffs’ motion to transfer and consolidate 263 cases across 48 districts into a single industry-wide business interruption coverage case. The Panel found that consolidation was inappropriate because differences overwhelmed any common factual questions – there was no common defendant, different policy forms, and a diverse group of plaintiffs located throughout the United States. Moreover, the Panel found that consolidation would be inefficient for all parties and courts involved.
  • 10E, LLC v. Travelers Indem. Co., United States District Court for the Central District of California Case No. 2:20-cv-04418-SVW-AS, 2020 U.S. Dist. LEXIS 156827: The court granted Travelers’ Motion to Dismiss, interpreting “direct physical loss” to require “the permanent dispossession of something” as opposed to a temporary restriction of the use of property. The 10E court found that the plaintiff-restaurant was not entitled to business interruption loss or civil authority coverage arising from governmental orders restricting restaurants to take-out and delivery due to COVID-19.
  • Gavrilides Management Co. v. Michigan Insurance Co., Michigan Circuit Court Case No. 20-258-CB-C30: The court granted Michigan Insurance Company’s motion to dismiss after finding that a loss of income due to orders limiting a restaurant’s operations to take-out and delivery in response to COVID-19 did not satisfy the requirement of physical loss of or damage to property. The Gavrilides court stated that “physical alteration to or physical damage or tangible damage to the integrity of the building” was required for coverage.
  • Malaube, LLC v. Greenwich Ins. Co., United States District Court for the Southern District of Florida Case No. 20-22615-Civ, 2020 US Dist LEXIS: Magistrate Judge Edwin Torres recommended granting Greenwich Insurance Company’s Motion to Dismiss COVID-19 Business Interruption claims brought by a restaurant. Where government orders prohibited indoor dining but allowed delivery and take-out orders, Judge Torres found that no “direct physical loss or damage” occurred because the government orders never made the plaintiff’s restaurant uninhabitable or substantially unusable.
  • Rose’s 1, LLC v. Erie Ins. Exch., District of Columbia Superior Court Case No. 2020 CA 002424 B, 2020 D.C. Super. LEXIS 10: The court granted summary judgment after finding that government orders restricting business operations do not constitute “direct physical loss.” The court found that that the government’s orders did not cause any “direct” change to properties, that the orders did not have any “effect on the material or tangible structure of the insured properties,” and the orders did not constitute a “loss” because they did not have any “direct physical intrusion on to the insured property.”
  • Diesel Barbershop, LLC, v. State Farm Lloyds¸ United States District Court for the Western District of Texas Case No. 5:20-CV-461-DAE, 2020 U.S. Dist. LEXIS 147276: The court granted State Farm’s motion to dismiss, finding that business interruption coverage required tangible injury to property and upholding the policy’s virus exclusion. Specifically, the court found that the shut-down orders were a sequential result of the presence of COVID-19, and therefore, “the primary root cause” of Plaintiffs’ business closure.
  • Social Life Magazine, Inc. v. Sentinel Ins. Co. Ltd., United States District Court for the  Southern District of New York No. 20 Civ. 3311 (VEC): The court denied plaintiff’s motion for preliminary injunction because COVID-19 does not cause physical damage to property, rather, “it damages a person’s lungs.”
  • Optical Services USA, et al. v. Franklin Mutual Insurance Company, New Jersey Superior Court Case No. BER-L-3681-20: The court denied Franklin Mutual’ s motion to dismiss, finding that plaintiffs should have the opportunity to engage in issue-oriented discovery to fully establish the record regarding direct covered losses and to amend their complaint accordingly. The court also found that Franklin Mutual failed to provide any controlling legal authority supporting their interpretation of “direct physical loss,” admitting that the New Jersey legal authority addressing this issue was limited.
  • Martinez v. Allied Insurance Company of America, United States District Court for the Middle District of Florida, Case No. 2:20-cv-00491-FtM-66NPM: The court granted Allied’s motion to dismiss, upholding the policy’s virus exclusion. The court found that plaintiff failed to assert that his loss or damage was due to a “covered cause of loss.” Rather, the court found that because the plaintiff’s damages resulted from COVID-19, neither the governmental orders narrowing plaintiff’s dental services nor the disinfection of the dental office constituted a “covered cause of loss” pursuant to the policy’s virus exclusion.
  • Studio 417, Inc., et al. v. The Cincinnati Insurance Company, United States District Court for the Western District of Missouri Case No. 20-cv-03127-SRB, 2020 U.S. Dist. LEXIS 147600: The court denied Cincinnati’s motion to dismiss, finding that the plaintiff had adequately stated a claim for direct physical loss and claims under the policy’s civil authority, ingress and egress, and dependent property coverages. Specifically, the court found that plaintiff’s adequately alleged a causal relationship between COVID-19 and their losses – that COVID-19 “is a physical substance” that attached to and deprived Plaintiff’s of their property, making it “unsafe and unusable”.
  • Turek Enterprises, Inc. v. State Farm Mutual Automobile Insurance Company, et al., United States District Court for the Eastern District of Michigan Case No. 20-11655, 2020 U.S. Dist. LEXIS 161198: The court granted State Farm’s motion to dismiss, finding that “direct physical loss” required tangible damage and that coverage was otherwise precluded by the virus exclusion. Specifically, the governmental orders and plaintiff’s business interruption losses resulting therefrom “would not have occurred but for COVID-19.”

Lether Law Group currently represents several national insurers in COVID-19 business interruption litigation in state and federal courts in Washington, Oregon, California, and Pennsylvania. If you have questions about any state-specific requirements which have been enacted due to the COVID-19 pandemic or general questions in regard to pending insurance claims and compliance with any regulatory requirements, please feel free to contact our office.

The above article is an opinion based on various resources such as industry knowledge and is not to be construed as legal advice or to be used as such. If you require legal advice or would like to inquire further about the information contained in this article, please feel free to contact our office directly.