Kristin H. Jones and Sara B. Richman Quoted in Insurance Journal Article, 'Businesses Opening Despite Shutdown Could Face Questions Over Coverage'
Kristin H. Jones, a partner in the White Collar Litigation and Investigations Practice Group of Pepper Hamilton, and Sara B. Richman, a partner in the Health Sciences Department of Pepper Hamilton, were quoted in the June 8, 2020 Insurance Journal article, " Businesses Opening Despite Shutdown Could Face Questions Over Coverage."
"It is rare for the insurance commissioner to issue such a pointed warning so, yes, businesses should take that warning seriously and know that if they defy the shutdown orders, that may affect their ability to collect coverage that might otherwise be due," said Kristin Jones, a Philadelphia, Penn.-based partner at Pepper Hamilton.
That said, the question of whether coverage would exist in this situation is a complicated one, she added.
"This is not a clear cut issue," she said. "The analysis depends heavily on the language of each business' policy and the type of loss for which the business is seeking coverage."
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Questions regarding insurance coverage may not be limited to businesses that reopen without permission, either, Jones said.
"Courts will also need to determine issues such as whether businesses that properly reopen in the yellow phase, but fail to follow the yellow phase guidance, have engaged in criminal or intentional conduct that invalidates their insurance coverage," she said.
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Perhaps complicating the issue further is that various types of exclusions in policies can present in different forms and can range in scope, said Sara Richman, Philadelphia, Penn.-based partner at Pepper Hamilton.
"Ultimately, this has to be a policy-by-policy assessment," she said. "The overall message to insureds is to know your policy. If it has an exclusion for intentional or illegal acts, or defines 'occurrence' in a way that does not include intentional acts, the business should proceed with caution."
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Jones said she is not aware of any cases being filed in Pennsylvania in which coverage has been denied on this basis. However, that could change as many businesses are just beginning to reopen, and post-reopening claims have yet to arise or are still in the early stages of handling, she said.
"There will almost certainly be litigation if a carrier invokes exclusions to preclude coverage on the basis that the business owner defied the shutdown order, and it will be up to the courts to settle the debate about whether those exclusions can be properly invoked under these circumstances." Richman added.
In fact, discussion around this issue is something Jones said she saw begin "immediately following the commissioner's remarks." Because of this, it's something she believes will be raised between business owners and their insurers in court for some time.
"The question of whether violations of shutdown orders amount to illegal or criminal conduct is very complicated, particularly where federal, state and local guidance conflict," Jones said. "It will undoubtedly be litigated for years to come."