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Insurance Issues Caused by Coronavirus (COVID-19)

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Business interruption coverage provided by a commercial property policy typically is triggered by “direct physical loss of or damage to property at premises which are described in the Declarations.”

The courts that have addressed whether the mere presence of a contaminant in a structure satisfies this requirement have reached varying results. The law in each jurisdiction and the facts involved in each case, including the specific policy language in question, ultimately will determine this issue. See, e.g.Mama Jo’s Inc. v. Sparta Ins. Co., 2018 LEXIS 201852 (S.D. Fla. June 11, 2018) (no trigger); Gregory Packaging v. Travelers Prop. & Cas. Co. of America, 2014 LEXIS 165232 (D. N.J. Nov. 25, 2014) (trigger); Great N. Ins. Co. v. Benjamin Franklin Fed. Sav. & Loan Assn, 793 F. Supp. 259 (D. Or. 1990) (no trigger); Universal Image Prods. v. Chubb Corp., 703 F. Supp. 2d 705 (E.D. Mich. 2010) (no trigger).

Second, many business interruption policy forms exclude “Loss Due to Virus Or Bacteria.” Indeed, the widely used Insurance Services Office (ISO) form CP 01 40 07 06 excludes “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” The exclusion specifically states that it applies to business interruption coverage. Therefore, even in jurisdictions in which the presence of COVID-19 satisfies the “direct physical loss of or damage to” mandate, coverage for business interruption loss may be excluded from coverage if not added by endorsement. (Of course, resourceful lawyers representing insureds will burn the midnight oil to develop novel ways to negate the exclusion. We’d be the latter….)

If business interruption coverage is not available, other coverages may be. For example, “civil authority” coverage typically responds when a federal, state or local government order prohibits an insured’s access to its property. The availability of this coverage will vary among policy forms and jurisdictions and may or may not require proof that the order was predicated on “physical damage” to property. Cf. United Air Lines, Inc. v. Ins. Co. of State of Penn., 439 F. 2d 128 (2d Cir. 2006) (no coverage if shutdown based on fear of damage); with Sloan v. Hartford Ins. Co., 207 N.W. 2d 434 (1973) (coverage for loss caused by curfew). Again, specific policy terms will control.

In addition, a policy may provide “contingent business interruption” coverage, which typically provides coverage for economic loss caused by damage to the property of a key supplier. Policy terms may limit coverage to damage to the property of a direct supplier or may include damage to the property of suppliers of suppliers. Who is and is not a “supplier” as defined by the policy often will be the determinative coverage issue. See, e.g., Pentair, Inc. v. American Guar. & Liab. Ins. Co., 400 F. 3d 613 (8th Cir. 2005) (electrical substation not a “supplier of goods and services”); Millennium Inorganic Chem. Ltd. v. Nat’l Union Fire Ins. Co., 744 F. 3d 279 (4th Cir. 2014) (supplier of natural gas without contractual privity with insured not a “direct supplier”). [Source: https://www.bakerdonelson.com/coronavirus-review-your-business- interruption-insurance-policy-now, accessed March 20, 2020.]

The information contained in this presentation is intended only for the purpose of providing general information and does not constitute legal advice, nor is it a substitute for legal services. By providing this information we are not establishing an attorney-client relationship, and nothing contained in this presentation should be construed to necessarily be applicable to your unique situation. No such attorney- client relationship exists unless a written Engagement Agreement has been endorsed by McCormick Law & Consulting and the client. You should always engage the services of an attorney to determine which, if any, legal solutions are right for you.

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  • Being a first time business owner, you want to make sure you're making all the right decisions. Choosing McCormick Law & Consulting, along with Emma and Taylor, made the process so easy! Emma understood right away what my primary concerns were, and was able to execute everything in a very timely manner! She was extremely easy to talk to and she took the time to explain everything to me, settling my nerves with taking this next big step. Taylor made the process of making it all official completely stress free.
    Crystal G.
  • McCormick Law & Consulting was integral in the creation of our non-profit. We promised our 12 y/o son that we would keep fighting cancer for kids like him but we couldn’t have kept that promise without John McCormick and his team. We were hooked at our first meeting when John simply asked “ Tell me about you son.” McCormick Law and Consulting took care of all the legal work while allowing us to focus on our mission. John and his team continue to be a great resource and supporter of D-Feet Cancer The Dalton Fox Foundation. We couldn’t have asked for better legal representation. Thank you McCormick Law & Consulting.

    William F.
  • I definitely could have created my new business, Davis Wealth Management LLC, but boy that would have been a mistake. Because business formation is not an area in which I practice, I had no idea where my blind spots were, and let me tell you there were plenty. The knowledge I received from the firm is invaluable.

    John McCormick and his firm are very reasonably priced and quickly and efficiently assisted me in creating my new business. It was completely turn key; they did everything for me.  I can't recommend their services enough. Also, huge shoutout to Taylor who kept me informed every step of the way!

    James D.
  • I highly recommendMcCormick Law & Consulting! My Father and I live in two separate states and the properties he needed legal services for are in Virginia. I reach out to Taylor on two separate occasions and she was very responsive and professional. The first time we used their services it went so smoothly that by the time I needed their services again I knew I could just send over the necessary documents, pay my invoice and rest assured it would all get taken care of. They eliminated the stress that comes with handling some else's affairs and I so appreciate that.
    Heather C.
  • From the the very 1st conversation with their office it was clear they would be responsive to all my questions and any support with my business. They are relatable and make their customers feel comfortable with any questions and or concerns that might arise while using their services. I am happy to have found them to support me with my small business needs!
    Lisa N.
  • I can't say enough great things about the professional team at McCormick Law & Consulting! We really had no idea of who to trust and who we could count on for quick and professional service in the Hampton Roads area for getting our new business up and running smoothly and the Team at McCormick Law & Consulting really knocked it out of the park with us!
    Jerry G.
  • I had the good fortune of working with McCormick Law on a business sales contract. I sent them the initial draft provided by the buyer along with a few notes about my specific concerns. They carefully went through the document and provided meaningful additions and corrections that better protected my interests. Thanks to Bobby and John for their personalized attention.
    Arthur B.
  • Mr. McCormick and his entire team were amazing! They assisted me in a legal matter concerning a business dispute. Mr. McCormick is highly experienced, ethical, dedicated, and was prepared to fight my legal matter in court if necessary. I thank the entire team for believing in me and would highly recommend them to anyone!!
    Jeanette L.
  • We used McCormick Law to start up another LLC and it was a great experience. I have used other lawyers and attorneys in the past and I experienced delayed responses and it was what I have come to expect.From the first interactions with Robert and his team, I was surprised to how responsive they were. I even mentioned to my new business partner that this was not normal and I was very happy.Needless to say I will be using McCormick Law for all of my business needs in the future.
    Colton S.
  • I utilized this firm for help on a real estate matter. I felt comfortable with the advice I received and am happy to continue doing business with them and referring others to the practice. Everyone I engaged with was welcoming and made the process very easy.
    Christian S.
  • John and his team were great to work with. They provided advice for starting my business and set everything up in an efficient and timely manner. I will definitely recommend them to others!

    Elizabeth H.
  • I contacted McCormick Law firm to register my moving service in NC. They did an outstanding job. Completed the process way sooner than I expected. Thank you, Taylor.

    Steve T.

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    McCormick Law, PC d/b/a McCormick Law & Consulting and Driving Defense Law is a boutique law firm located in Norfolk, Virginia & Raleigh, North Carolina, that seamlessly serves clients throughout Virginia and North Carolina. Whether you are a new or existing client of the firm, McCormick Law, PC, cannot represent you on any new matter until the firm has made a determination that there is no conflict of interest and that it is willing to accept the new engagement. The testimonials on this website reflect the real-life experiences and opinions of our clients. However, the experiences are personal to those particular clients, and may not necessarily be representative of all clients. We do not claim, and you should not assume, that all clients will have the same experience. Your outcome may vary.

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