Business Interruption Insurance Coverage and COVID-19

Lauren L. Wood

By Lauren L. Wood



In this time of massive economic downturn, stay-at-home orders and required closures of non-essential businesses, business owners are looking to their commercial insurance policies to provide coverage for their losses. Specifically, insureds are looking to apply the business interruption coverage of their policies. Of course, each specific policy must be read and applied to the insured’s specific situation, but the pandemic certainly raises issues that will need to be addressed by many insurers and their policy holders.

Business interruption coverage provides insureds with protection for a reduction in income resulting from a necessary suspension in operations. Often, this coverage applies when a business sustains loss of income due to physical damage to the property, such as from a fire or flood. Business owners filing claims arising out of the COVID-19 crisis are finding that their insurers do not interpret “physical damage” to include damage caused by the pandemic. Insureds have already begun filing lawsuits across the country, challenging this interpretation. They argue that possible COVID-19 contamination constitutes physical damage triggering coverage.

Some policies specifically address loss and damage from a virus, either in their exclusions to coverage or in their endorsements expanding coverage. Although many commercial policies contain coverage exclusions for damage caused by a virus or bacteria, insureds are examining these exclusions for ambiguities that may be construed in their favor. Disputes are also occurring over the interpretation of endorsements referencing losses caused by a virus. In one such case, SCGM v. Certain Underwriters at Lloyd’s, a theater chain filed a declaratory judgment action in The U.S. District Court for the Southern District of Texas against its insurer Lloyd’s of London, for its anticipated refusal to provide coverage under a “Pandemic Event Endorsement.” Lloyd’s has asserted that COVID-19 is not specifically listed as a covered disease on the endorsement while SCGM argues it is a variation of SARS-CoV, which is listed.

Another coverage contained in many policies is “civil authority” coverage. This coverage typically applies when a civil authority (i.e., a state or local government) issues an order prohibiting access to a business due to direct physical damage or loss to a property other than the insured premises. Continue reading »

Favorable Changes to 065 Agreements in Missouri Apply Prospectively Only

Laura Gerdes Long

By Laura Gerdes Long



The Court of Appeals of Missouri’s Western District has issued an opinion holding that the recent amendment to Section 537.065 RSMo. may not be applied retrospectively, under the Missouri Constitution.  The Court of Appeals held in Desai v. Seneca Specialty Ins. Co., 2018 WL 3232697 (not released for publication as subject to motion for rehearing or transfer, etc.) that the trial court’s judgment should be affirmed in which the insurance company’s motion to intervene and motion for relief from judgment were denied.  The insurance company had argued that Section 537.065, as amended effective August 28, 2017, required that it should have received notice of a “065” agreement and the opportunity to intervene as a matter of right.

Continue reading »

Missouri On Track to Reform Interpleader Law: House Bill 1531 Unanimously Approved by the Senate

Laura Gerdes Long

By Laura Gerdes Long



co-authored by Laura Gerdes Long and Katherine M. Flett

As he was leaving office, Missouri Governor Eric Greitens signed at least 77 bills into law, including House Bill 1531, which may protect insurance carriers subjected to purported bad faith claims.

“Interpleader” is a civil procedure vehicle used to force claimants to litigate a dispute involving two or more claims to a limited amount of money held by a third party, such as an insurance carrier.  A common example is when multiple people are injured in a car accident and the injuries exceed the amount covered by the tortfeasor’s policy limits.  What should the insurance carrier do?

Under the prior law, codified at Section 507.060 RSMo, the tortfeasor’s insurer could interplead the policy limits, but the insurer would remain subject to a purported bad faith claim.  This would put insurers in an impossible situation, choosing between paying claims on a first-come, first-serve basis to avoid time-based bad faith claims, paying the limits on the most seriously injured claim, or gathering all of the claimants’ documentation supporting their injuries or damages in an attempt to globally resolve all claims within the policy limits, and reducing the insured’s exposure to excess claims.

Continue reading »

Recent Illinois and Missouri Supreme Court Decisions Reduce Litigation Risks of Companies Operating in Multiple States

Michael J. McKitrick

By Michael J. McKitrick



Authored by Michael J. McKitrick with contribution from David A. Zobel

On September 21, 2017, the Illinois Supreme Court handed down its decision in Aspen American Insurance Company v. Interstate Warehousing, Inc, greatly limiting the ability of plaintiffs to sue foreign corporations in Illinois simply because the corporation is registered to do business in and may have minimal contacts with Illinois. As described below, the decision joins Illinois with a nationwide trend disfavoring forum-shopping – a practice in which plaintiffs bring suit against defendants in plaintiff-friendly venues unrelated to the defendant’s contacts and the injury giving rise to the action.

The Aspen case concerned a claim filed in Illinois by a plaintiff who had been injured in a fire which occurred in Indiana. The defendant corporation was incorporated in and maintained its principal place of business in Indiana, although it did maintain a warehouse in Illinois and was also registered to do business in Illinois. The defendant corporation moved to dismiss the lawsuit for lack of proper jurisdiction as a result of these facts and the Circuit Court agreed. On appeal, the plaintiff argued that maintenance of a warehouse in Illinois and being registered as a foreign corporation in Illinois was sufficient to impart general jurisdiction over the corporation. Continue reading »

Insurance Considerations

David A. Zobel

By David A. Zobel



Authored by David A. Zobel with contribution from Michael J. McKitrick

Part 9 of a 12-part series on Legal Considerations for Your Missouri Leasing Business: What You Should Consider Now, Later, and Throughout the Process

As a caveat to this discussion on insurance, we recommend that you consult with an independent insurance agent/broker to ensure that you obtain the most appropriate type and extent of insurance coverage that your specific business will need.

Having said that, there are some general insurance issues every residential or commercial leasing business should consider.

First, foremost, and fundamentally – don’t skip over insurance and do not assume your personal policies will cover your company’s property or operations.  Most personal policies do not cover businesses. Continue reading »

Statutory Changes in Missouri Lead to Blue Skies Ahead for Insurance Companies Facing Bad Faith Set-Ups and Collateral Source Rule Issues

Laura Gerdes Long

By Laura Gerdes Long



Recent legislation signed by Missouri Governor Eric Greitens is expected to promise procedural relief from bad faith set-ups in Missouri as well as provide clarity regarding the collateral source rule.

New Legislation Affecting Bad Faith Set-Ups

Section 537.065 of the Missouri Revised Statutes allows claimants and insureds to contract to limit recovery to insurance coverage. This statute is unique to Missouri, as no other states have established such a practice by statute. Typically, the insured, while knowing that he will not be held personally responsible, agrees to either settle the claim or to not legally oppose the tort victim’s prosecution of the claim at trial. Post-trial the insurer is limited to disputing only the legal conclusion of whether coverage existed and usually barred from re-litigating any other aspect of the suit. These agreements are often used to pressure the insurance company into providing a defense where there may not be coverage or to pay policy limits on questionable claims.  They are also used as schemes whereby insureds and claimants work in concert to obtain coverage and create inflated damage awards at uncontested bench trials.

Effective August 28, 2017, Missouri House Bills 339 and 714 repeal section 537.065 and enact a new section 537.058, as well as a revised section 537.065 (as signed by Gov. Greitens). The new law will help curb the abuses associated with section 537.065 agreements by allowing insurers to intervene in underlying lawsuits. By participating in the underlying lawsuit, the insurer will be able to present a more accurate picture on liability, damages, and coverage issues. The bills further provide that an insured cannot enter into such a settlement agreement with a claimant if the insurer is providing the insured a defense without reservation, under the reasoning that an insured should not be allowed to enter into an unauthorized settlement agreement if an insurer defends without qualification. When an insurer defends under the policy, the insurer is fulfilling its policy obligations and should expect the insured to comply with its corresponding policy obligations, including the duty to cooperate and refusal to pay provisions.  As such, section 537.065, as amended, adds the following procedural protections: Continue reading »

Operational Considerations – Purchasing Real Estate – Title Insurance

David A. Zobel

By David A. Zobel



Part 5 of a 12-part series by David A. Zobel on Legal Considerations for Your Missouri Leasing Business: What You Should Consider Now, Later, and Throughout the Process

Once you’ve established your legal entity, the next step will be to purchase the real estate you wish to lease (or invest in). The appropriate type of real estate for your business will vary depending on a number of factors, including your location, level of investment, and potential tenant base. Not surprisingly, thorough research, inspections, and planning are critical to ensuring success. In this and the next two posts in this series, we’ll outline several important issues at this juncture: title insurance, indenture review, and ensuring appropriate loan documentation.

Title Insurance

When you purchase real estate you may be purchasing more (and maybe less) than the land and improvements you actually see. The land is likely encumbered by third parties who may have rights (possibly superior to your rights) to your land which could restrict your use and ownership in various ways. Encumbrances can be minor, such as a minimum set-back restrictions simply preventing owners from building up to a property line, but others can be more severe, such as utility or access easements, and even unreleased mortgages and liens – requiring the purchaser to pay up or lose the property. Continue reading »

Is Your Property Insured Against a Riot?

David A. Zobel

By David A. Zobel



The current unrest facing the St. Louis metropolitan region carries with it the elevated risk of damage and/or destruction of both real and personal property. While everyone intends and hopes their insurance policies cover all eventualities that may arise, the truth of the matter is that not all eventualities are covered by insurance.

Unfortunately, it is generally only after something truly unexpected happens that policies are reviewed and tested for actual coverage. At that moment, it may be too late to both prepare for the event and/or adjust coverage.

As a result, it may be wise now to pull out your current auto, homeowners, renters, commercial or other similar policies to review each policy’s specific language.

One of the coverage limitations to consider are so-called “force majeure” clauses. “Force majeure” is a contractual term that relieves parties from performing their contractual obligations when certain circumstances beyond their control arise, often making their performance under the contract impractical or impossible. Examples of these circumstances can include earthquakes, war, strikes, epidemics, acts of God, and riots. Continue reading »

Unemployment Insurance in Missouri: Should Employers Respond to Claim Notices?

Ruth Binger

By Ruth Binger



New regulations require Missouri employers to respond timely to information requests regarding unemployment insurance compensation. The federal Trade Adjustment Assistance Extension Act (“TAAEA” or the “Act”) of 2011 requires, among other things, that states increase employers’ duties regarding unemployment compensation claims. Specifically, the Act provides that states must require employers to respond timely and adequately to Claim Notices, information requests from state agencies relating to unemployment benefit compensation claims. It also requires states to charge the unemployment accounts of employers that repeatedly fail to respond to Claim Notices for unemployment benefits paid to ineligible former employees.

In Missouri, an employee that satisfies all the unemployment insurance benefit eligibility requirements may still be disqualified from receiving benefits for voluntarily quitting without good cause or for being discharged for work misconduct. Once a terminated employee files a claim for unemployment benefits, the Missouri Division of Employment Security (“DES”) mails the former employer a Claim Notice, which requires a response within 10 days. The Claim Notice permits the employer to protest an unemployment benefits claim because the former employee quit voluntarily or was discharged for misconduct. If the claim is not in dispute, the employer must still respond to acknowledge the claim.

Some employers routinely fail to respond to Claim Notices. They may systematically choose not to respond to Claim Notices to avoid becoming involved in a former employee’s benefits appeal. Continue reading »

New Illinois Recording Law Designed to Combat Fraudulent Filings Likely to Have Immediate Impact on Title Insurance Industry

David A. Zobel

By David A. Zobel



Illinois recorder of deeds offices are now authorized to implement fraud referral and review processes to detect and address fraudulent recorded instruments in their counties with the recent passage of Illinois House Bill 2832 (55 ILCS 5/3-5010.5).

The new law identifies 19 separate indications of potential fraud, but county recorders are each free to create a unique detection system for their county. Under these systems, once the recorder reasonably determines an instrument to be “fraudulent, unlawfully altered, or intended to unlawfully cloud or transfer the title of any real estate property,” the law affords the recorder two distinct courses of action.

First, recorder personnel may, at their own discretion, notify law enforcement officials, including the Department of Financial and Professional regulation, of the suspected fraud and request assistance for further review and potential criminal investigation.

Second, the recorder may, upon notice and confirmation of the potential fraud with the last owner of record, flag and refer the instrument to a local administrative law judge for hearing. If that judge determines the instrument to be legitimate, a judgment stating so would then be recorded along with the original instrument. However, if determined to be fraudulent, a judgment stating “that the document in question has been found to be fraudulent and shall not be considered to affect the chain of title of the property in any way” would then be recorded with the original instrument. No documents, regardless of legitimacy, would be “unrecorded” or struck from the county records.

Like many new laws, this new recording law is not without controversy. Proponents praise the law as an expedited and cost-effective alternative to filing a lawsuit to clear a victim’s title. However, critics complain the law unconstitutionally expands the powers of county recorders and may lead to unforeseen consequences in the recovering real estate industry.

While the ultimate effect (and constitutionality) of the new law remains to be seen, the law will almost certainly have an immediate impact on Illinois title companies. In some cases, it may lead to longer and more expensive administrative review and closing periods as title companies may be reluctant to insure any title during an active review/referral process. However, in others, the law’s finality in determining the legitimacy of unusual instruments in a chain of title may lead to decreased risks borne by title companies and thus decreased costs borne by the consumer.

Either way, the new law’s application and effect will certainly need to be considered by companies seeking to insure title in Illinois.

Posted by Attorney David A. Zobel. Zobel primarily represents individuals and corporations in the defense of civil litigation, including contract, negligence, and real estate matters. In addition to his court room work, Zobel assists in advising clients on contract and employment issues and regarding issues arising under the Sunshine Law.