Thanksgiving is a time to spend with family and friends and celebrate all that we are thankful for. It is also a time for a cornucopia of potential insurance claims. Thanksgiving-related insurance claims can run the gamut from auto accidents, to slip-and-falls, fire losses, and even business losses.
This year, it is estimated that 54.6 million people will travel more than 50 miles for their Thanksgiving celebrations, which greatly increases the risk of an auto accident or other travel-related insurance claim. In addition, the National Fire Protection Association (“NFPA”) has noted that Thanksgiving is the leading day of the year for home cooking fires in the United States.[1] In fact, the NFPA has reported that home cooking fire reports increase over 200% on Thanksgiving Day versus the daily average for the rest of the year.[2]
Increased risks of insurance claims are also not limited to homeowners and/or auto claims and the risks do not end on Thanksgiving Day. Millions of Americans will also venture out on Black Friday to take advantage of the many deals that can be found on the biggest shopping day of the year. This leads to increased exposure for businesses from parking lot accidents, slip-and-falls, miscellaneous property damage, and theft.
The increased number of losses over the Thanksgiving Weekend also results in an uptick in insurance claims under auto policies, homeowners policies, and business insurance policies. This means that insurers need to be ready to staff and handle a potentially large volume of new claims, both first-party and third-party, in the days and weeks surrounding the Thanksgiving Holiday.
With these increased risks in mind, the Lether Law Group Family encourages everyone to use extra caution as you enjoy time with family and friends and/or as you venture out on Black Friday.
If something unexpected should occur or if you need advice for post-Thanksgiving-related insurance claims, please keep in mind that the attorneys at Lether Law Group have over 33 years in combined experience in advising insurers and defending first and third-party claims. This includes providing coverage advice and defending large property losses, catastrophic accident injuries, and other spontaneous and unexpected claims. Please feel free to contact us at any time if you would like to discuss any Thanksgiving-related claims or any other matter.
On October 17, 2022. The United States Court of Appeals for the Ninth Circuit issued additional Opinions regarding COVID-19 Business Interruption claims.
In McCulloch, et al v. Valley Forge Ins. Co., et al¸ No. 21-35520, 2022 U.S. App. LEXIS 2860, 2022 WL 9830777 (9th Cir. Oct. 17, 2022), the Court affirmed a summary judgment ruling from the Western District of Washington dismissing claims by several dentists/dental clinics. The Plaintiffs argued that their claims were improperly dismissed because they asserted the claims resulted from “direct physical loss of or physical damage to” their insured premises. The Ninth Circuit disagreed.
While the appeal was pending, the Washington State Supreme Court issued its ruling in Hill & Stout, PLLC v. Mutual of Enumclaw Ins. Co., 515 P.3d 525 (2022), in which the Supreme Court held that “loss of intended use of property” and “loss of business income” from COVID-19 orders did not qualify for insurance coverage as “direct physical loss of or damage to property.” As a result, the Ninth Circuit dismissed the breach of contract/direct physical loss claim. The Court also dismissed Plaintiff’s claims that they were entitled to coverage under the policies’ civil authority coverage because there was no evidence that the Washington State Governor’s orders were in response to any actual physical property damages. Therefore, the Ninth Circuit concluded that the Hill & Stout Opinion also precludes coverage.
In addition, the Ninth Circuit dismissed the appeal for extra-contractual claims. With respect to the extra-contractual claims, certain Plaintiffs argued that the insurer unreasonably denied their claim and failed to conduct a reasonable investigation of the claims. The Ninth Circuit rejected both arguments. Specifically, the Court noted that the unreasonable denial claim first required a showing of an incorrect denial of the claim. Because the claim was properly denied, the extra-contractual claim failed. The Court rejected the unreasonable investigation argument because “the insurer’s denial of coverage was based on a legal interpretation of the policy. [As a result,] [t]here was no need for factual investigation…”
In Hot Yoga, Inc. v. Philadelphia Indem. Ins. Co.¸No. 21-35806, 2022 U.S. App. LEXIS 28674, 2022 WL 9732180 (9th Cir. 2022), the Ninth Circuit similarly affirmed dismissal of contractual claims based on the Washington State Supreme Court’s Opinion in Hill & Stout. In addition, the Court held that the policy’s virus exclusion, precluding coverage when a virus initiates the causal chain that led to the cause of any claimed loss, barred coverage.
The Ninth Circuit also rejected the insured’s arguments regarding its extra-contractual claims. The insured argued that the district court erred in dismissing extra-contractual claims premised on the insurer allegedly “misrepresenting the pertinent policy language and preemptively denying the claim without any investigation.” The Ninth Circuit held that the claims necessarily failed because the policy did not provide coverage.
As we previously opined, it is clear that the Washington State Supreme Court’s decision and reasoning in Hill & Stout is having a substantial impact on pending COVID-19 BI claims in Washington. We anticipate that there will be several other similar rulings in the near future.
If you have any questions about the above Ninth Circuit cases and how the Hill and Stout case will continue to impact COVID-19 BI claims and cases, please give us a call.
Kevin J. Kay
Shareholder
Kevin is a graduate of Pacific Lutheran University and Seattle University School of Law. He is licensed to practice in the state and federal courts of Washington and admitted to practice before the Ninth Circuit Court of Appeals. In addition, Kevin has appeared pro hac vice in courts in Louisiana and California. Kevin has represented insurers and insureds in coverage for 16 years. These claims involve personal and commercial auto policies, commercial general liability, professional liability, and E&O insurance. Kevin has also advised and represented risk pools, insurers, and insured in matters ranging from automobile/bus accidents to catastrophic landslides. His practice also includes construction defect disputes, personal injury claims, commercial leases, and significant property damage disputes.
As the COVID-19 crisis continues to impact every aspect of our personal and professional lives, Lether Law Group is continuing to monitor any and all new developments that may impact our clients. To the extent that you have any questions or would like to discuss any potential issues related to COVID-19 and its impacts, please feel free to contact us at any time.
One of the issues that has been persistent since the inception of the crisis is whether the commercial impacts of COVID-19 should be remedied by federal, state, and local governments or through the private sector. Specifically, and as we have previously reported, many governmental entities have called on commercial property insurers to extend Business Interruption and Civil Authority coverage to businesses closed or limited due to the COVID-19 outbreak.
However, as has now been widely chronicled, Business Interruption coverage is only available due to necessary suspension of operations due to physical damage to the insured premises. Moreover, many modern commercial property forms contain an exclusion for any losses caused by the presence, proliferation, or spread of a virus.
As a result, under most circumstances surrounding COVID-19 related business shutdowns, there would likely not be coverage available to the insured. However, that does not mean that there is no coverage available in every circumstance.
Given what appears to be clear and unambiguous policy language concerning Business Interruption coverage, what is emerging is a series of bad faith claims against insurers that are summarily denying Business Interruption claims without conducting any investigation or even in some instances, not even with a written explanation of the coverage position. Policyholders nationwide are bringing bad faith claims alleging cursory, over-the-phone denials of these claims.
As we have previously noted, we are not aware of any insurance commissioner in any United States jurisdiction that has suspended the Unfair Trade Practices Act regulations during the COVID-19 epidemic. To the contrary, rather than suspending insurance claims regulations, insurance commissioners are taking steps to ensure that those regulations are followed. By way of example, on April 14, 2020, the insurance commissioner for the State of California issued a Notice to insurers advising of complaints about cursory denials and even refusals to open Business Interruption claims. The Notice then provided as follows:
Upon receipt of a notice of claim, the insurer is required to provide the policyholder with the necessary forms, instructions, and reasonable assistance, including but not limited to, specifying the information the policyholder must provide in connection with the proof of claim and begin any necessary investigation of the claim. (Regulations, section 2695.5(e)(2).) Thereafter, every insurer is required to conduct and diligently pursue a thorough, fair, and objective investigation of the reported claim, and is prohibited from seeking information not reasonably required for or material to the resolution of a claim dispute before determining whether the claim will be accepted or denied, in whole or in part. (Regulations, section 2695.7(d).)
(emphasis added)
The California OIC’s Notice demonstrates the conflict between the public and private sectors. The OIC cannot force insurers to provide coverage so the agency is left to issue stern Notices to insurers requiring the insurers to follow the law.
Ultimately, pronouncements such as that by the California OIC do not really change anything. Insurers are still required to comply with claim handling regulations and act in good faith. That includes promptly responding to pertinent communications, conducting a reasonable investigation, and providing the insured with a written explanation of the coverage decision, etc.
Once again, if you have any questions or concerns relating to COVID-19 related claim or any other issues, please feel free to contact Lether Law Group at any time.
