California Case Is a Reminder That Not All Insurance Policies Are Alike Regarding COVID-19 Losses

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Losses from the COVID-19 outbreak could qualify as property damage and therefore could be recoverable under an all-risk insurance policy.

April 5, 2021
Neal I. Sklar & Joshua A. Morehouse - Peckar & Abramson, P.C.

A recent case from the Central District of California reminds us that not all insurance policies are alike. Depending on the particular policy, losses from the COVID-19 outbreak could qualify as property damage and therefore could be recoverable under an all-risk insurance policy.

COVID-19 has in many cases imposed significant costs on contractors, and in a host of ways. Contractors’ attempts to recover these costs from owners or insurers have at times been frustrated by contractual or policy language written after a lengthy time, during which the risk of a pandemic on the scale of COVID-19 was not as much of a concern as it is now. This has led contractors to explore new, often creative legal theories in their attempts to recover costs flowing from COVID-19.

A recent Complaint filed in the Central District of California focuses on all-risk property insurance policies and the potential for contractors who have purchased such policies to classify contamination from COVID-19 as an insurable property loss.

In AECOM v. Zurich Insurance Company, Case No. 2:21-cv-00237-JAK-MRW (C.D. Cal), a contractor purchased “all-risk” property insurance from Zurich. This policy covered “economic losses from all risks not expressly excluded.” According to the Complaint, the presence of COVID-19 on its properties “physically alter[ed] air, airspace, and surfaces preventing… (the contractor) from using its properties for their intended purpose and function.”

Reprinted courtesy of Neal I. Sklar, Peckar & Abramson, P.C. and Joshua A. Morehouse, Peckar & Abramson, P.C.

Mr. Sklar may be contacted at nsklar@pecklaw.com
Mr. Morehouse may be contacted at jmorehouse@pecklaw.com



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