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A New Wave of Insurance Defense Litigation Arrives with The Coronavirus


A new wave of insurance defense efforts are expected in response to policyholders fighting denied claims for years to come due to the damage that the coronavirus has and continues to inflict on US and global businesses, placing insurance companies at risk and stuck in litigation over liability lawsuits. According to the Organization for Economic Cooperation and Development, this year alone, the virus is expected to cut global growth to 1.5 percent, costing an estimated $1.5 trillion in economic activity. Experts estimate that the financial fallout will be much greater than events linked to, for example, Hurricane Katrina, but much less likely to be covered by insurance.

A number of companies mistakenly believe that their insurance policies are meant to cover disasters like those linked to the coronavirus, regardless of what their policy contract actually says. This coverage – known as business interruption or contingent business interruption insurance – covers lost revenue when businesses have to unexpectedly halt operations or when shutdowns occur at supplier locations. However, the policies almost always cite “direct physical loss or damage” in the policy language, which refers to damage typically done due to a fire, earthquake, etc., not an epidemic that makes people sick.

Why Business Interruption Insurance Is Narrowly Tailored

In many circumstances, this explicit definition, which clearly excludes anything outside of an event that causes physical damage to the structure of the workplace, is due to fallout from other epidemics, such as SARS, Ebola, and Zika, whereby insurance companies very quickly realized that business interruption claims linked to epidemics could become unwieldy. In order to address this coverage issue, some companies even decided to start offering a separate, new kind of insurance, where the exclusive goal would be to make companies whole if losses occurred due to epidemics and whereby companies could select policies that would pay out either when a certain number of deaths reached a threshold or coverage kicked in when a particular event occurred, such as a government shutdown. In other words, the company would base its policy on the type of business it runs and the particular risks it faces in the event of an epidemic.

Contingent Business Interruption Insurance

In some cases, it is possible that contingent business interruption insurance might cover decontamination costs after an outbreak, for example, however, businesses have to realize that this coverage will likely be tightly restricted in terms of having a policy limit/ceiling.

If You Are an Insurance Carrier Facing a Lawsuit, Contact Our Texas Insurance Defense Attorneys

Businesses are already challenging the language in these policies in court, and more litigation is expected in the coming months, relying on such arguments as making the claim that the virus can spread via the structure of a work building and thus lead to physical loss in the workplace.

The Brownsville insurance defense attorneys of Colvin, Saenz, Rodriguez & Kennamer L.L.P. have successfully defended a number of major insurance companies against a broad range of claims here in Texas. To schedule a consultation, contact our office today and find out more.





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1201 East Van Buren St.
Brownsville, TX 78520

Phone: 956-542-7441
Fax: 956-541-2170


323 West Cano, Suite 100
Edinburg, TX 78539

Phone: 866-330-6805
Fax: 956-380-0254

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Colvin, Saenz, Rodriguez & Kennamer L.L.P., represents clients throughout South Texas and the Rio Grande Valley, including people living in Brownsville, Harlingen, McAllen, Edinburg, Laredo, Corpus Christi, San Diego, Alice, Kingsville, Rio Grande City and other communities in Hidalgo County, Duval County, Jim Wells County, Kleberg County, Starr County, Cameron County, Webb County and Nueces County. -Site Map-

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