SOUTHERN DISTRICT OF ALABAMA GRANTS WITH PREJUDICE INSURER’S MOTION TO DISMISS BUSINESS OWNER’S DECLARATORY ACTION SEEKING COVERAGE FOR COVID-RELATED BUSINESS INTERRUPTION
On
October 21, 2020, the Southern District of Alabama issued its first opinion addressing
a COVID-19-related claim for lost income under the “business interruption”
provision of an “all-risk” policy. Hillcrest Optical, Inc. v. Cont’l Cas.
Co., No. 1:20-CV-275-JB-B, 2020 WL 6163142 (S.D. Ala. Oct. 21, 2020). After
the plaintiff closed its business in compliance with Governor Ivey’s “stay-at-home”
order, it filed a claim with its insurer for lost income, alleging a direct
physical loss from the loss of use of its office. The plaintiff’s policy
contains a provision covering “direct physical loss of or damage to” the plaintiff’s
business. It does not, however, define what constitutes “direct physical loss
or damage.” The policy also contains a “Business Income and Extra Expense” endorsement
providing coverage for lost income from a necessary suspension of operations
during a “period of restoration” caused by a covered direct physical loss to
property. This provision covers expenses reasonably and necessarily incurred
because of direct physical loss or damage but excludes periods of restoration extended
by regulations governing the use of the covered property. It expressly
contemplates physical repair to or rebuilding of the property.