Questions as to whether business interruption insurance will cover losses related to COVID-19 shutdowns and slowdowns have been asked since the first of Governor Cuomo’s Executive Orders in March requiring all non-essential businesses to shut down and have their employees stay home. Many claims and lawsuits have been filed since then, and pending legislation may have an impact on the results. What’s the latest guidance?

While policyholders across the country have filed hundreds of lawsuits against insurers seeking coverage for lost revenue and other business interruption losses related to COVID-19, to date there have only been a handful of court decisions, mostly favoring insurers, on the grounds that the policyholders failed to demonstrate a physical loss. For example, a New York judge orally denied a publishing company’s motion that argued the “virus exists everywhere,” finding that the virus “damages lungs. It doesn’t damage printing presses.”[1]

However, a few recent cases have favored policyholders. In Missouri, a federal judge allowed the plaintiffs to pursue discovery in a case alleging the pandemic resulted in a direct physical loss as a result of the shutdown order.[2] In New Jersey, a court rejected an insurer’s claim that COVID-19 related losses cannot qualify as covered losses.[3] And in North Carolina, a court found that the plaintiff’s business income losses resulting from the governmental shutdown constituted a “loss” to property, sufficient to trigger coverage under the insurer’s policies.[4]

Some states are considering mandatory business interruption coverage laws and applying them retroactively. New York introduced legislation in late March 2020 that would require carriers insuring against loss or damage to property to cover business interruption during a declared state of emergency due to COVID-19.[5] Currently, this bill is pending in the Assembly committee.[6] Other New York bills are pending on the issue, including a similar bill in the Senate and another related to providing such coverage to “insureds with coverage who operate programs and services including a mental health outpatient provider… substance use disorder treatment provider… and community-based program funded under the office of mental health.”[7] Currently, none of these bills are law in New York, and there will most likely be challenges under the contracts clause, the due process clause, and the takings clause of the U.S. Constitution.

Insured businesses should be proactive by collecting and retaining documents to support their loss, be ready to demonstrate the financial health of their businesses before and after COVID-19, and have their insurance policies reviewed to determine when and how to provide notice and what the potential insurance defenses may be. CMM can assist you with evaluating your insurance claim – please contact us today.


[1] Social Life Magazine, Inc. v. Sentinel Ins. Co., Ltd., Case 1:20-cv-03311-VEC (S.D.N.Y. 2020).

[2] Studio 417 v. Cincinnati Ins. Co., 2020 U.S. Dist. LEXIS 147600 (W.D. Mo. Aug. 12, 2020).

[3] Optical Servs. USA/JCI v. Franklin Mut. Ins. Co., 2020 N.J. Super. Unpub. LEXIS 1782 (N.J. Super. Aug. 13, 2020).

[4] North State Deli, LLC v. Cincinnati Ins. Co., 2020 WL 6281507 (N.C. Super. Ct. Oct. 9, 2020).

[5] New York Assembly Bill 10226-B8.

[6] See https://www.nysenate.gov/legislation/bills/2019/A10226.

[7] See New York Assembly Bill 10327, http://www.nysenate.gov/legislation/bills/2019/A10327; see New York Senate Bill 8178; http://www.nysenate.gov/legislation/bills/2019/S8178.

Photo by Anastasiia Chepinska on Unsplash.

Thank you to Daniel Axelrod for his research and writing assistance for this article.