Court Sides with Insurer in COVID-19 Business Interruption Case
Florida’s Third District Court of Appeal has affirmed a lower court’s decision, denying coverage to IMC Property Management and Maintenance, Inc. (IMC). The appellate court ruled in favor of Westchester Surplus Lines Insurance Company, rejecting IMC’s claim that its business interruption losses stemming from government-mandated shutdowns were covered under its insurance policy.
Background of the Case
The legal dispute originated after IMC, a property management firm, was compelled to shutter its commercial properties in March, April, and May of 2020 due to state-wide COVID-19 shutdown orders. Seeking financial relief, IMC filed a claim with Westchester Surplus Lines Insurance Company under its business interruption coverage. The insurer denied the claim, which led IMC to file a lawsuit seeking a declaratory judgment on the policy’s applicability.
At the heart of the matter was an endorsement in IMC’s policy titled “non-physical damage business interruption.” This provision provided coverage for business losses arising from a shutdown order due to a “hazardous condition” at “the premises of the insured.” IMC argued that the government’s COVID-19 shutdown orders should trigger coverage.
However, Westchester asserted that the policy only applied when a shutdown order specifically targeted IMC’s premises due to a localized hazardous condition, not broad government-imposed restrictions.
Court’s Reasoning
The appellate court agreed with the trial court’s interpretation, stating that the plain language of the policy did not support IMC’s claim. The judges emphasized that the phrase “the premises of the insured” appeared repeatedly in the endorsement and required a direct link between a shutdown order and specific conditions at IMC’s locations.
The court determined that Florida’s COVID-19 shutdown orders were general public health measures, not due to hazardous conditions specific to IMC’s properties. Because IMC couldn’t establish that its premises were specifically cited as a reason for closure, the court ruled that the insurance policy did not apply.
Legal Precedent and Industry Impact
The ruling aligns with numerous court decisions across the country that have dismissed business interruption claims based on COVID-19 shutdowns unless physical damage or a specific health-related threat existed at the insured location.
This decision reinforces that insurance contracts must be interpreted based on their explicit language, and broader public health measures do not automatically meet the conditions for business interruption coverage.
Conclusion
IMC’s loss in court means the company will not receive insurance payouts for its COVID-19-related closures. The ruling further underscores that policyholders seeking business interruption coverage should meticulously examine the specific wording of their insurance contracts.
While IMC could still petition for a rehearing, the decision represents a clear victory for insurers facing similar claims arising from pandemic-related shutdowns.
