Judge dumps COVID-19 business interruption claims against Erie Insurance

A federal judge in western Pennsylvania has ruled that losses from the COVID-19 pandemic and related government shut-down orders do not trigger business interruption (BI) coverage under Erie Insurance’s (Erie) commercial “all risk” property policies.

Reuters reported that Chief US District Judge Mark Hornak rejected the arguments of businesses in eight states and the District of Columbia, ruling: “As devastating as COVID-19 has been from a health and safety standpoint, property has not been lost or damaged by the presence of the virus, in the sense that people cannot access, use, or inhabit it due to its impaired physical condition.”

Judge Hornak also allowed Erie to dismiss the policyholders’ breach of contract claims, and said that given the lack of coverage, the insurer was okay to use form letters to deny policyholders’ claims in “blanket” fashion. He also said he expects additional claims for bad-faith and unfair trade practices to fail – but that will not be determined until Nov.3.

The individual and potential class-action cases against Erie from businesses in eight states – Illinois, Maryland, New York, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia – and the District of Columbia were consolidated into multidistrict litigation (MDL) in December 2020.

The Judicial Panel on Multi-District Litigation (JPML) considered the MDL treatment appropriate for the Erie litigation because it involved only two policy forms: one with a virus exclusion and the other without, as well as a defined geographical scope.

As of September 2022, the University of Pennsylvania Carey Law School’s COVID coverage litigation tracker records over 2,000 BI cases field with US courts.