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Travelers wins another COVID-19 coverage ruling

Posted On: Sep. 15, 2020 2:22 PM CST


Another federal court in California on Monday ruled that an insurer does not have to cover business interruption losses for a policyholder that closed its operations due to government-ordered COVID-19 lockdowns.

A Travelers Cos. Inc. unit is not obligated to pay a lost income claim submitted by Mudpie Inc., a San Francisco children's clothing and toy store, because the store did not suffer a physical loss under the terms of the policy, the court ruled.

In Mudpie Inc. v. Travelers Casualty Insurance Co. of America, which was heard in U.S. District Court for the Northern District of California, the store said it had lost income after it was forced to close earlier this year to help limit the spread of COVID-19.

Hundreds of businesses across the United States have filed similar suits.

In ruling for the insurer, U.S. District Court Judge Jon S. Tigar noted that the Travelers policy says the insurer “will not pay for loss or damage caused by or resulting from … loss of use or loss of market.”

The separate provision for loss of use suggests “that the ‘direct physical loss of … property’ clause was not intended to encompass a loss where the property was rendered unusable without an intervening physical force,” the judge ruled granting Travelers motion to dismiss the case.

Late last month, Travelers scored a similar victory in a case heard in a California federal court involving a local restaurant and on Friday another federal court in the state ruled in favor of a Farmers Insurance unit in a case involving a pair of barbershops.

So far, most COVID-19 business interruption rulings have favored insurers, but numerous other state and federal court rulings are expected over the next several months.

In the United Kingdom, however, judges on Tuesday ruled that insurers should cover coronavirus-related losses under some circumstances.

More insurance and risk management news on the coronavirus crisis here