As we previously reported, Judge Bough of the U.S. District Court for the Western District of Missouri denied an insurance carrier’s motion for summary judgment in K.C. Hopps Ltd. v. The Cincinnati Ins. Co. Inc., No. 20-cv-00437-SRB (W.D. Mo. Sept. 21, 2021) and sent the case to trial.

On October 28, after a three day trial, the jury returned a verdict in favor of the insurer. The case involved claims by a group of restaurants under their insurance policies’ business income (and extra expense) coverage form. Under that coverage, the insurer is obligated to pay for the insured’s actual loss of business income when it must suspend operations due to physical loss or damage to the insured’s property. Of note, the Court previously ruled that “proof of physical contamination is sufficient to meet the Policy’s requirement for physical loss or damage.”

At the close of the case, the insurer made a motion for a judgment as a matter of law on the grounds that the policyholder had failed to show its properties were physically damaged by COVID-19 and needed to be restored before operations could resume. Although the Court denied the motion, it provides a window into some of the key testimony that may have swayed the jury.

According to the motion, plaintiff admitted that it never tried to determine whether COVID-19 was on its premises and one of its experts, a molecular epidemiologist, testified that there was no testing for the presence of COVID-19 at any of the policyholder’s nine restaurant locations. Similarly, a chemical enzymology expert, testified that COVID-19 can be removed and inactivated by cleaning, and also can decay on its own, the insurer said. As a result, the insurer argued that the policyholder did not present any evidence that COVID-19 was present on its premises and thus could not establish physical contamination.

Additionally, the restaurant group’s owner testified that the restaurants did not shut down in February despite knowledge of COVID-19. Instead, the restaurants only closed after government orders required it to do so, and reopened once the orders became less restrictive. Accordingly, the insurer argued in its motion that “[e]ven if plaintiff’s evidence showed physical contamination at any of its properties, which it does not, the evidence introduced by plaintiff demonstrates that its alleged loss was not caused by any physical loss, physical damage or physical contamination caused by the virus, but was instead caused solely and completely by plaintiff’s compliance with governmental orders that impacted its operation of its premises.”

The verdict form did not indicate the reason for the verdict so we do not know whether one or both of the insurer’s arguments were persuasive. But, the trial again highlights the evidence that policyholders will need to develop – at a minimum, proof of physical contamination of the property by COVID-19 – in order to establish coverage for business interruption from COVID-19.