COVID-19 Case Survives Insurers’ Motion for Partial Summary Judgment Based Upon Endorsement for Infectious Disease

    The Nevada trial court distinguished a prior decision from the Nevada Supreme Court and denied the insurers' Motion for Partial Summary Judgment on a COVID-19 claim. Bloomin' Brands, Inc. v. Ace Am. Ins. Co., et al., No. A-21-830204-B (Nev. Dist. Ct., June 21, 2024) (order denying motion for partial summary judgment). The decision is here.

    Several defendant insurers issued policies to Bloomin' Brands for the term December 31, 2019 to December 31, 2020 (2020 Policies). Endorsement No. 11 to each of the 2020 policies was titled "infectious or Contagious Disease Extension." The endorsement extended coverage for the perils of Infectious or Contagious Disease.

    Bloomin' Brands sought coverage for business losses due to COVID-19. The insurers argued there was no coverage based upon the Nevada Supreme Court's decision in Starr Surplus Lines v. Eighth Judicial District Court of State of Nevada, 535 P.3d 254 (2023). There, the court held the disease did not cause "direct physical loss or damage" within the context of the policy under consideration. The insurers filed a motion for partial summary judgment against Bloomin' Brands.

    The trial court found that the 2020 policies differed from the policy at issue in Starr Surplus. The policy in Starr Surplus did not contain a similar "Infectious or Contagious Disease Extension" endorsement or otherwise reference the peril of Infectious or Contagious Disease. The insurers' motion was specifically limited to Bloomin' Brands' claims under the 2020 policies' coverages for "direct physical loss, damage or destruction" of property. It did not address or seek judgment concerning extended coverage that could be available under Endorsement No. 11. 

    The court noted that the 2020 policies meaningfully differed from the policy before the Nevada Supreme Court in Starr Surplus. The holding in Starr Surplus did not control this case because the 2020 policies were different. Endorsement No. 11 expressly referenced the peril of infectious or contagious disease, and extended coverage under the 2020 policies beyond mere direct physical loss or damage. The insurers did not meet their burden of showing that Starr Surplus controlled this case, where, unlike the policy at issue there, the 2020 policies differed materially by expressly extending the scope of coverage afforded for the period of Infectious or Contagious Disease. 

    Further, the contamination exclusion in the 2020 policies did not apply for two reasons. First, the 2020 policies contamination exclusion did not use the term "virus" in defining its scope. Second, even if it did, to hold that the exclusion applied to claims such as Bloomin' Brands' would allow the exclusion to swallow coverage that was expressly afforded under the 2020 policies. The contamination exclusion could not reasonably be read to exclude coverage for the peril of Infectious or Contagious Disease. 

    Finally, the 2020 policies loss of market/loss of use exclusion did not apply. The insurers agreed that this exclusion did not apply where the loss at issue was caused by "direct physical loss, damage or destruction" of property, or where the 2020 policies expressly extended coverage to instances where "direct physical loss, damage or destruction" was not required.