Case Law Alerts
Without any specific inquiry or request from the insured for insurance coverage that might apply to a pandemic-related government closure, the brokers had not breached their duty to obtain requested coverage.
The plaintiff, Soundview, purchased a commercial insurance policy for its movie theater through its insurance brokers. The policy provided business interruption coverage in the event of direct physical loss or physical damage to the property. Soundview’s principal and the insurance broker defendants had routinely worked together to purchase insurance over the course of 14 years.
Soundview was forced to close its theater after a COVID-19 government shutdown order. When the insurance carrier denied Soundview’s claim for insurance coverage due to the closure, Soundview sued its insurance carrier for breach of contract and asserted separate claims in the same suit against its own insurance broker, Five Star Coverage Corp. and Wilkinson, for negligence and breach of fiduciary duty.
The insurance carrier and the insurance brokers filed motions to dismiss. The court granted the insurance carrier’s motion, concurring with the majority view and finding that closure due to the government shutdown order did not constitute a “direct physical loss of or damage to the property” that would trigger business income coverage under the policy. The court also granted the insurance brokers’ motion and dismissed the broker, finding that in the absence of any specific inquiry or request by Soundview for insurance coverage that might apply to a pandemic-related government closure, the brokers had not breached their duty to obtain requested coverage. The court ruled that the brokers did, in fact, procure the policy requested by the plaintiff.
Further, the court importantly recognized that, even assuming, arguendo, that a “special relationship” existed, the plaintiff still failed to point to any other policy coverage available on the market before March 2020 that would have provided coverage for (business interruption) losses stemming from the pandemic (and, thus, the coverage availability/causation element could not be established or pled sufficiently).
Case Law Alerts, 2nd Quarter, April 2021 is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2021 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.