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NJ Attys Look To 3rd Circ. On Virus Coverage Denial Cases

By Jeannie O'Sullivan · May 19, 2021, 4:34 PM EDT

Garden State attorneys are eagerly awaiting guidance from a Third Circuit panel on whether or not insurers must cover business losses stemming from the COVID-19 pandemic, a New Jersey State Bar Association panelist said Wednesday during the first day of the group's annual convention.

Many virus coverage suits have been stayed pending the Third Circuit's decision in 14 consolidated cases brought by businesses challenging the denial of claims stemming from the pandemic, said Kelly M. Purcaro, a partner at A.Y. Strauss and co-chair of the firm's litigation group.

The cases reflect a nationwide struggle to balance the needs of businesses that found their operations halted by the unprecedented public health crisis and the plight of insurers facing a tidal wave of claims stemming from an unanticipated type of loss, according to Purcaro.

"On one side, you have businesses, large and small, saying we paid the premiums ... and we should receive the benefit for which we paid. On the other hand, you have the insurance company saying, 'Everybody's struggling,'" Purcaro said during a presentation held via Zoom during the association's second all-virtual convention.

Purcaro spoke during a program titled, "A Class Action Update: Federal and New Jersey Developments for 2020-2021." While pandemic-related litigation isn't limited to class actions, Purcaro said the topic is still a "very interesting area of the law, particularly from a class action perspective."

In the case leading the consolidated Third Circuit litigation, Philadelphia-based attorney Rhonda Hill Wilson accused Hartford Casualty Company and its broker-agent, USI Insurance Services LLC, of breaching their insurance contract and obligations to her and her law firm by denying their coverage claim stemming from the pandemic and the government's subsequent shutdown orders for nonessential businesses in March 2020.

U.S. District Judge Eduardo C. Robreno ruled in September that the "clear and unambiguous" virus exclusion in Wilson's policy barred coverage for pandemic-related losses. The judge likewise rejected Wilson's argument that her situation fell within the virus exclusion exemption for fungi, wet rot, dry rot, bacteria and virus due to a "specified cause of loss" other than fire or lightning or an equipment breakdown.

Judge Robreno also denied Wilson's motion to remand the case to state court, reasoning that the amount in controversy reached the $75,000 threshold for federal court jurisdiction.

No argument date has been set yet for the Third Circuit litigation, which is still in the briefing stage. On April 6, U.S. Circuit Judges Thomas L. Ambro and Patty Shwartz issued an order consolidating the 14 cases and encouraging the parties to file joint briefs.

Among the plaintiffs are restaurants, health care providers and a health spa that filed claims against insurers Travelers Property Casualty Co. of America, Twin City Fire Insurance Co. and others.

In addition to the virus exemption, pandemic insurance coverage cases have raised questions about whether the pandemic-related losses constitute the property loss or damage required to trigger coverage and if the government shutdown mandates led to coverable losses under policies' "civil authority" provisions.

"We're really seeing a grappling going on nationally with how folks are going to handle this," Purcaro said.

--Editing by Jill Coffey.

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