Insights

On Friday, June 28, 2024, the U.S. Supreme Court overruled Chevron U.S.A. v. Natural Resources Defense Council (“Chevron”)[1] in Loper Bright Enterprises v. Raimondo (No. 22-451) and Relentless v. Dep’t of Commerce (No. 22–1219)[2] (the two cases collectively referred to as “Loper Bright”), bringing an official end to the decades-old and eponymously named “Chevron deference” doctrine. Not content to stop there, the Court returned fresh to work Monday, July 1, to, in Corner Post, Inc. v. Board of Governors of the Federal Reserve System (No. 22-451)[3] (“Corner Post”), effectively extend the limitations period to challenge final agency actions under the Administrative Procedure Act (“APA”).

On July 25, 2023, the U.S. Departments of Labor, Treasury, and Health and Human Services (the “Tri-Agencies”) released long awaited proposed regulations (the “Proposed Rule”) and a Technical Release, which together propose new requirements for comparative analyses of nonquantitative treatment limitations (“NQTL”) under the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”).  On the same day, the Tri-Agencies released their annual report to Congress on implementation of MHPAEA, as required under the Consolidated Appropriations Act, 2021 (“CAA 2021”). 

On October 14, 2022, the district court for the Western District of Pennsylvania dismissed business interruption claims in multidistrict litigation against Erie Insurance Group. The court concluded that “in all jurisdictions whose law applies to the actions in this MDL, ‘direct physical loss of or damage to’ property occurs when a structural alteration to property is evident and that alteration requires that the affected property be repaired, rebuilt, or replaced before the property can be used again.” Order at 41. According to the court, “the COVID-19 virus did not harm [the plaintiffs’] properties in a way so as to generate a loss of or to the property itself, and Plaintiffs have not plausibly pleaded that the situation at their properties was or would be any different.” Id. at 49. The court also rejected the plaintiffs’ contention that they are entitled to coverage under the reasonable expectations doctrine, finding that they did not plausibly plead any misconduct by Erie and that they “did not have a reasonable expectation of coverage based on the ‘all risk’ nature of the Policies or the Policies’ ‘complicated terms.’” Id. at 55-56. The court further found that a virus exclusion in one of the relevant policies “would be enforceable and unambiguously would preclude coverage here.” Id. at 59. The case is In re: Erie COVID-19 Business Interruption Protection Insurance Litigation.

On September 20, 2022, the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal of a jeweler’s COVID-19 business interruption lawsuit. The court held that income lost while being closed due to pandemic-related orders was not the result of “direct physical loss.” Order at 4. The court relied on its earlier decision in Q Clothier New Orleans LLC v. Twin City Fire Insurance Co., 29 F.3d 253 (5th Cir. 2022) and said loss of use from the shutdown orders did not tangibly alter the property.  Id. at 4, 6. The court also affirmed the dismissal of the negligent procurement claims against the jeweler’s insurance brokers, finding that they did not have an affirmative duty to advise the company about the availability of pandemic-related insurance coverage. Id. at 8. Instead, the court said, an agent’s duty ends once the insured receives the insurance it requested; it is the policyholder’s responsibility to request the type of insurance it wants. Id. at 11-12. The case is Coleman E. Adler & Sons, L.L.C. v Axis Surplus Insurance Co.

On September 13, 2022, the Oklahoma Supreme Court reversed a district court’s grant of summary judgment to a Native American tribe on its COVID-19 business interruption claim. Noting that “nearly all jurisdictions deciding this issue in the context of COVID-19 business interruption claims have found that ‘direct physical loss or damage’ is not ambiguous,” the court “follow[ed] those jurisdictions” and held the tribe’s losses were not covered because implementation of COVID-19 mitigation measures at its properties “constitute[d] measures to stop the spread of the virus from one person to another, not repairs to or replacement of damaged or lost property.” Opinion at 13, 17-18. The case is Cherokee Nation v. Lexington Ins. Co.

On August 25, 2022, the Washington Supreme Court affirmed in an en banc decision, the grant of summary judgment to Mutual of Enumclaw on two dental office owners and operators’ putative COVID-19 business interruption class action. The court held that “[i]t is unreasonable to read ‘direct physical loss of . . . property’ in a property insurance policy to include constructive loss of intended use of property.  Such a loss is not ‘physical.’” Opinion at 3. The court also noted as persuasive authority that “the national consensus is that COVID-19 and related governmental orders do not cause physical loss of or damage to a property and do not trigger coverage under similar policy language.” Id. at 18. The court also held that the virus exclusions in plaintiffs’ policies applied because the causal chain that led to the plaintiffs’ closure of their dental practices was initiated because of COVID-19. Id. at 25. The case is Hill & Stout, PLLC v. Mut. Of Enumclaw Ins. Co.

On August 2, 2022, the district court for the Middle District of Florida granted Zurich American Insurance Company’s motion to dismiss a restaurant operator’s COVID-19 business interruption claim. The court found that the policyholder’s allegations did not materially differ from those in SA Palm Beach, LLC. v. Certain Underwriters at Lloyd’s London, 32 F.4th 1347 (11th Cir. 2022) and, therefore, that it could not state a claim for direct physical loss of or damage to property. Order at 4-5. The case is Planet Hollywood Int’l, Inc. v. Zurich Am. Ins. Co.

On July 25, 2022, the Fourth Circuit affirmed the dismissal of several Florida restaurants’ COVID-19 business interruption complaints. According to the court, there was “no reversible error.” Order at 3. The case is Skillets, LLC v. Colony Insurance Co.