Business Interruption Coverage and COVID-19 Shutdowns
Third District Court of Appeal, State of Florida
No. 3D23-1435
Lower Tribunal No. 21-5192
Opinion Filed: February 19, 2025
Judge: Carlos Guzman
Insurance – Business Interruption – Policy Interpretation – COVID-19 Shutdowns – Declaratory Relief – Summary Judgment
Background of the Case
This case involves a dispute over business interruption insurance coverage during the COVID-19 pandemic. IMC Property Management and Maintenance, Inc. (“Insured”) submitted a claim for losses caused by government-mandated shutdowns that forced the closure of its commercial properties. The claim was denied by Westchester Surplus Lines Insurance Company (“Insurer”), citing policy language that required the shutdown to be due to hazardous conditions at the insured’s specific premises.
When the insurer denied coverage, the Insured filed a lawsuit seeking declaratory relief. The trial court granted final judgment on the pleadings in favor of the insurer, concluding that the policy language did not support coverage for the shutdowns. IMC appealed the decision, arguing that the court misinterpreted the policy’s terms.
Factual and Procedural History
1. The Insurance Policy Provisions
The policy included an Endorsement for Non-Physical Damage Business Interruption, which covered:
“The Actual Loss Sustained resulting from necessary interruption of or interference with business conducted by the Insured caused by any of the following perils:”
Specifically, the relevant section addressed losses due to contagious disease if the interruption was caused by an order from a public authority due to:
- Infectious or contagious disease manifested by any person on the insured’s premises.
- Illness arising from contaminated food or drink provided on the insured’s premises.
- The existence or threat of hazardous conditions, either actual or suspected, at the insured’s premises.
2. COVID-19 Shutdown Orders
In March, April, and May of 2020, government authorities issued shutdown orders requiring businesses to close to slow the spread of COVID-19. These orders applied broadly to various businesses across the region, including IMC’s commercial properties.
IMC submitted a claim under the policy for business interruption losses, asserting that the government shutdowns triggered coverage under the contagious disease clause. However, Westchester denied coverage, arguing that the shutdown orders were not issued due to hazardous conditions at IMC’s specific premises.
3. Trial Court Ruling
IMC filed a lawsuit seeking declaratory relief, asking the court to confirm that coverage was owed under the policy. The trial court ruled in favor of Westchester, concluding:
- The policy’s language was clear and unambiguous.
- Coverage required that the shutdown order be issued due to specific hazardous conditions at IMC’s premises.
- General shutdown orders due to the broader pandemic did not meet the policy’s coverage requirement.
Court of Appeal’s Ruling
1. Policy Language and Interpretation
The appellate court affirmed the trial court’s interpretation, stating that:
- The phrase “the premises of the insured” consistently referred to the insured’s specific property across all sub-paragraphs of the endorsement.
- Coverage was only triggered if there was a specific government shutdown order targeting conditions at the insured’s premises.
2. No Coverage for General Pandemic Shutdowns
The court found no evidence that the shutdown orders were issued due to any hazardous condition specific to IMC’s properties. The orders were directed at all businesses generally in response to the global pandemic, not conditions at any particular location.
3. Legal Precedents and Contract Interpretation
- The court applied Florida’s established principle that insurance contracts should be interpreted according to their plain language.
- It reaffirmed that identical terms in a policy must be given consistent meaning.
Final Judgment
The appellate court affirmed the trial court’s decision. The policy’s language clearly required a direct link between the shutdown order and hazardous conditions at IMC’s specific premises. Because the COVID-19 shutdowns were general in nature, IMC’s claim did not qualify for coverage under the policy.
Key Takeaways: Business Interruption Insurance and COVID-19
This case underscores important principles of insurance coverage interpretation in Florida:
- Business interruption coverage for contagious disease requires a direct connection between the government order and specific hazardous conditions at the insured’s premises.
- General pandemic shutdowns affecting a wide range of businesses do not trigger coverage under standard business interruption clauses.
- Insurance contracts are enforced according to their plain, unambiguous language.
This ruling reinforces insurers’ ability to deny coverage for general shutdowns unless the policyholder can show that the order was issued specifically due to conditions at their insured property.
Todays insight:
“Injustice anywhere is a threat to justice everywhere.”