COVID-19 insurance coverage articles written over the past several weeks are a mixed bag — some articles paint an optimistic picture, where coverage is a possibility or a certainty, whereas others make coverage sound as unlikely as returning to the office before May Day.

The latter group should tread lightly, however, as New York courts have made clear that insurers are liable for any consequential damages they cause by improperly denying or delaying payment under property damage and business interruption policies, even in the absence of bad faith. Thus, insurers must carefully analyze each and every situation, consider deciding close calls in favor of their policyholders, and do whatever they can to get covered dollars in their policyholder’s hands as soon as possible.

In Bi-Economy, a policyholder alleged that it was entitled to consequential damages because its insurer improperly delayed coverage under its property damage and business interruption coverage after a fire damaged its facility. The policyholder further alleged that its insurer’s inaction ultimately led to the collapse of its business.

The trial court dismissed the claim and the Fourth Department affirmed, because “the insurance policy expressly excluded coverage for consequential losses, and thus it cannot be said that consequential damages were contemplated by the parties when the contract was formed.”

"The very nature and purpose of those policies — to receive coverage promptly in the wake of a covered event so that businesses can “get back on [their] feet as soon as possible."

The Court of Appeals reversed. Taking a cue from the 1854 decision in Hadley v. Baxendale, the court held that the insurer, the breaching party, “is liable for those risks foreseen or which should have been foreseen at the time the contract was made.” The court found that the policy’s consequential loss exclusion precluded coverage of consequential loss under the policy, but did not bar consequential loss claims against the insurer for breaching the policy.

The court went on to remark that the key element, and perhaps the only element, is foreseeability — not bad faith. And, that with property damage and business interruption policies, consequential damages are inherently foreseeable because, as the Bi-Economy court noted, the very nature and purpose of those policies — to receive coverage promptly in the wake of a covered event so that businesses can “get back on [their] feet as soon as possible” — is enough to satisfy the foreseeability element.

This rapidly-evolving COVID-19 situation continues to impact the well-being of our lives and loved ones. Awareness and education during this struggle is of the utmost importance. My thoughts and prayers remain with you and your families during this challenging time.

-Hon. Eric Dick

Business May Be Entitled to Money

Since early March, attorney Eric Dick has repeatedly been vocal about how business could be entitled to receive under their business interruption insurance policies as the result of COVID-19. To support his opinion he continues to note:

1. Direct physical loss doesn't require specific physical damage

2. Insurance Carriers must prove by that an exclusion is applicable

“The insurance companies are arguing that it will put them out of business if they pay these claims,” said Eric Dick, of Houston’s Dick Law Firm, who is reviewing the policies of those denied business interruption claims related to the coronavirus. “But everybody’s broke. … Welcome to the club.”

Eric Dick is an insurance attorney that represents in excess of 25 business that are making claims against their insurance carrier for business interruption.