New York’s top court braces for a pivotal showdown in a restaurant’s COVID-19 business interruption lawsuit, a decision that could echo throughout the insurance and business sectors both in the state and beyond. This landmark case defies the prevailing US trend favoring insurers in similar disputes.
The Heart of the Matter: CRO vs. Swiss Re
On Wednesday, the New York Court of Appeals will hear arguments about Consolidated Restaurant Operations (CRO) and Swiss Re’s Westport Insurance. The crux of the dispute is whether Westport Insurance should compensate CRO for its pandemic-related losses. CRO’s claim hinges on its all-risk policy, notably lacking a virus exclusion and boasting a substantial coverage cap.
A National Perspective: Insurers Generally Prevailing
Across America, COVID-19 business interruption cases have generally seen insurers emerge victorious. According to the American Property & Casualty Insurance Association, most federal and state courts have sided with insurers, irrespective of policy specifics. Exceptions are rare, with notable wins, like Baylor College of Medicine’s victory in Texas, being outliers.
New York’s Pivotal Role
The New York court’s impending decision carries considerable weight. Should the court favor CRO, it could potentially alter the insurance landscape due to New York’s significant role in insurance law and its widespread policy influence. This outcome could have extensive financial implications, benefiting businesses at the expense of insurers.
Implications and Stakeholders
Various parties, including the Metropolitan Transport Authority (MTA), have expressed vested interests, citing billions at risk. Legal experts like Nick Insua from Reed Smith highlight the broader impact of New York’s decision, potentially affecting policies governed by New York law, both domestically and internationally.
Debating the Core Issues
At the heart of the debate is whether COVID-19 constitutes a ‘physical loss’ and whether pandemics fall under typical insurance coverage. Insurers, represented by APCIA’s Claire Howard, argue that their policies were never intended for pandemic-related losses, while businesses accuse insurers of dodging their responsibilities.
The Financial Stakes
The financial implications are staggering. APCIA estimates that mandated coverage in New York alone could lead to colossal monthly business interruption losses. This figure dwarfs the premiums collected, indicating a significant financial strain on the insurance sector.
Global Context: Mixed Outcomes for Insurers
Globally, the situation varies. In the UK, regulatory intervention led to substantial insurer payouts, while Australia saw mixed results in its test cases. Canadian insurers, meanwhile, are navigating class action suits, with mixed outcomes thus far.
Conclusion: A Decision with Far-Reaching Impact
In this case, the New York Court’s decision could redefine the landscape for pandemic business interruption insurance, influencing not just US policy but also setting a precedent with global ramifications. This landmark case epitomizes the ongoing struggle to balance the needs of businesses against the realities of insurance coverage in unprecedented times.
