A state appeals court on Monday ruled six New Jersey businesses that say they were damaged by coronavirus restrictions in the early months of the pandemic can’t force their insurers to cover the losses.
While acknowleding the “overwhelming” harm some establishments faced, a three-judge panel found the language of so-called “business interruption policies” covered physical damage and specifically left out viral outbreaks.
“We recognize that COVID-19 has caused overwhelming economic losses to untold businesses and individuals dependent on those businesses in our state, nation, and the world,” Superior Court Judge Thomas Sumners Jr. wrote in a 54-page brief.
Nevertheless, he added, “plaintiffs’ insurance claims are restricted by the clear and plain meaning of their insurance policies, which we cannot rewrite to cover their unfortunate losses.”
The judges dismissed the businesses’ lawsuits.
More than 2,300 such suits have been filed in the last two years across the nation –including almost 150 of them in New Jersey, according to a litigation tracker from the University of Pennsylvania Carey Law School. But many state and federal courts have thrown them out, the school said.
In New Jersey, plaintiffs including the New Jersey Performing Arts Center, the Rockleigh Country Club in Bergen County and Jenkinson’s Boardwalk, the popular Jersey Shore amusement pier, have all claimed their insurance companies stiffed them by failing to honor coverage despite the hefty premiums they paid.
Monday’s decision stemmed from suits brought by six New Jersey businesses whose cases were merged into one appeal. The plaintiffs included:
- Cake Boutique and Harrison House restaurant, both based in Mullica Hill
- Lil’ Big Ones Child Care and Learning Center in South Plainfield
- Salted Bar Lime and Kitchen in Somerville
- Route 40 Diner in Monroeville
- Pure Focus Sports Club in Brick
Attorneys for the businesses couldn’t immediately be reached for comment.
As the pandemic emerged in March 2020, Gov. Phil Murphy ordered sweeping closures of businesses deemed non-essential, as well as onerous limits on essential businesses like grocery stores.
Restaurants, hair salons and gyms were shuttered for months and then operated for the next year at reduced capacity and with other health restrictions.
Some establishments sought to make use of business-interruption insurance, policies that typically cover closures due a fire or other emergency. But insurers have denied those claims, arguing they were never intended to cover a global pandemic. Language in the policies requires “direct physical damage” to trigger coverage, they said.
In New Jersey and elsewhere, the businesses sued, saying their damages were akin to natural disasters like Superstorm Sandy and Hurricane Katrina.
But Judge Sumners, in agreeing with a lower court decision, noted that past disasters such as Katrina and the Sept. 11 terrorist attacks weren’t covered by business-interruption insurance.
In those cases, Sumners said, issuers didn’t have to pay out because the plaintiffs couldn’t show that their closures were a direct result of their respective natural disasters.
Executive orders like those signed by Gov. Phil Murphy at the onset of the pandemic aren’t covered by the policies, he added. And most insurers specifically exempt the impacts of viral epidemics, an exclusion that became popular after the SARS outbreak of 2002.
In 2020, the industry’s Insurance Information Institute reported that U.S insurers would owe roughly $750 billion if every business were paid for interruption losses due to the pandemic.
Daniel Munoz covers business, consumer affairs, labor and the economy for NorthJersey.com and The Record.