Federal judge rules business owners can sue insurer over pandemic-related business losses

Federal judge rules business owners can sue insurer over pandemic-related business losses | Insurance Business

Federal judge rules business owners can sue insurer over pandemic-related business losses

A federal judge in Missouri has ruled that a group of businesses – hair salons and restaurants – can sue their insurer for business interruption losses caused by the COVID-19 pandemic.

The defendant in the case, Cincinnati Insurance, had moved to dismiss the case. But US District Judge Stephen Bough in Kansas City decided against the dismissal; the first judgment of its kind ruled in favor of policyholders, Reuters reported.

In similar cases in Michigan and Washington, D.C., insurers won by arguing that coverage was not warranted because the COVID-19 virus travels through the air, and thus does not cause physical damage.

Bough ruled that the presence of the virus was not a “benign condition.” The judge also noted that the plaintiffs plausibly alleged that particles were a “physical substance” that attached to and damaged their property, which rendered the property unsafe and unusable.

However, the judge did not rule on the case’s merits. The plaintiffs are business owners based in Missouri and Kansas.

Reuters reached out to Cincinnati Insurance – a subsidiary of Cincinnati Financial – for a comment, but the firm’s lawyers did not immediately respond to the request.