FWhen the pandemic began in early 2020 and the total lockdown was implemented, insurers faced disaster. Billions of dollars in claims from many Hollywood companies, including those involved in the live events business, were pouring in across the country.
But instead of paying, insurance companies looked at the petty and started denying claims en masse. Most insurers found that loss of income due to business interruption policies excluded coverage for a pandemic-induced shutdown and required physical loss or property damage. A legal battle over insurance claims related to COVID has begun, with more than 2,300 lawsuits filed for a refund decision, according to Pence, a COVID-19 insurance litigation tracker created by a law professor. baker tone.
“The insurance industry as a whole has taken a very aggressive approach to claims,” said Ty Childres, chairman of Jones Day’s insurance recovery team and principal attorney for 9/11 World Trade Center Properties. . “You had smaller facilities that were closed. That was the only way to save them.”
Janet Ruiz of the Insurance Information Institute, a member of a trade association whose members are among the world’s largest insurers, argues that insurers have failed to cope with the crisis of the COVID-19 pandemic. “After SARS, insurers realized that pandemics were international,” Ruiz said. “Even with our loss reserves and whatever kind of investment we might make, it would simply be impossible to have that amount of money available to pay for global losses, as we have seen.”
After two years in the US and 1 million deaths from COVID-19, insurers have had great success in the courts, with nearly every case closed or resolved in the insurers’ favor. Judges heard more than 80 percent of the cases pending filing. Many cases haven’t even made it past the early stages of trial.
In entertainment, big players like UTA, Paramount and Live Nation sued their insurers. After receiving partial claims Or totally denied. The The processes produced a variety of results, ranging from total losses to undiscovered firing attempts.
UTA is among hundreds of losers in COVID-19 insurance coverage battles. The agency was part of the first wave of claims, mostly filed by small businesses that could not do without insurance reimbursement. UTA sued Vigilant Insurance Co. and Federal Insurance Co., two subsidiaries of Chubbs, in November 2020 for $150 million to cover losses related to live events and canceled movies and TV shows. The UTA argued that its broad “all risks” policy for “direct physical injury or loss” should cover pandemic-related losses. He noted that Vigilant and Federal did not include virus or pandemic exclusion, which could make cases more open and closed.
Insurers, as in hundreds of other cases, argue that the phrase “direct physical loss” requires an actual or physical change in the insured property. They argued that the temporary restrictions imposed by the closing order on the use of UTA buildings and the alleged presence of the virus in its facilities do not meet these criteria. Furthermore, they argued that the UTA did not sufficiently prove that the virus was actually in its possession, and even if it could make such a claim, they said that “the virus harms people and not property”.
The Los Angeles judge and the State Appeals Panel sided with the insurers. “In the wake of the COVID-19 pandemic, many policyholders have presented arguments similar to those of the UTA, and most courts have rejected them,” said a statement from the California Court of Appeals for the Second Circuit issued in April. “It is now widely established that the temporary loss of use of property due to pandemic shutdown orders, without further ado, does not constitute direct physical loss or damage.”
The Court of Appeals upheld previous California state and federal court rulings against obtaining insurance in California. Posadas del Mar v. At California Mutual Insurance Co., the first state appeals court to hear a dispute over the coveted coverage found that the virus could cause direct physical harm, but the Inns did not prove this to be true. In your case.
An indicator of how COVID-19 coverage claims have been handled, whether they are filed in federal or state courts, say the attorneys involved in insurance law who monitor the proceedings. “This is a story about two courts,” he says. Boy. “Insurers in the federal court system have been extremely successful to date. This is a much more mixed story in state courts.” – (But not for UTA).
Veterans Insurance Lawyer Sean Crossner He notes that “state courts were more receptive to arguments put forward by policyholders.” He fears that his federal colleagues will deny cases before they are received prior to discovery, explaining that key questions must be asked in state higher courts before deciding on certain issues.
Michael Levine, who is also an experienced insurance attorney, agrees that federal courts handle cases in advance. “Some cases were filed before and wrong,” Levin said. “The problem is that they laid the foundations. The courts continued to protect the herd uniformly. ”
According to the COVID-19 insurance litigation tracker, 85% of cases heard in federal court were adjourned, compared to 66% in state court. “Federal courts have appealed widely to the insurance industry,” Baker said. “It was much more variable in the State Courts. Here’s the action, because at the end of the day, these are matters of state law. ”
Insurance contracts are governed by state law. This means that federal courts must ultimately follow guidance from each state’s supreme court on important issues, such as whether COVID-19 causes physical damage to property that will result in “all risk” policy coverage.
This means that insurance coverage disputes are ultimately decided by each state’s Supreme Court.
In April, the Massachusetts Supreme Court and the Iowa Supreme Court became the first Supreme Courts to decide whether or not companies should win lawsuits contesting denials of coverage. Both sided with the insurers.
The cases concerned whether there was physical damage to the property that led to coverage. Although the insured Waconda Club lost the lawsuit in Iowa Supreme Court, the judges ruled that the contamination could be physical loss or damage. As in the Inns of the Sea case in California, the court did not close the door on redressing all risk policy errors. It simply says that the case was not a necessary circumstance to prove in favor of the insured.
Baker said the ordinance “reflects a roadmap for some of these larger cases to show that the virus has contaminated the air, physically disrupting and damaging properties like HVAC systems and assembly lines, which in turn has forced business to close.”
Childres predicts that some decisions made by federal courts prematurely may begin to be “decided according to what state courts will do.”
For insurers, even a ruling party with direct physical losses or damage to the policyholder can cause major problems. Claire HowardThe director of property and consultant for the American Property Accident Insurance Association warns that a court decision that forces a company to cover retroactive delays “undermines the stability of the insurance industry and its ability to make claims against all existing insurance policies.
But entertain players like. Live Nation, MLB and the Los Angeles Lakers, who continue to operate in California, may have some reason to believe they will be able to vindicate their claims. While insurers still have an undefeated record in insurance coverage cases, that could soon change.
In February, a federal judge ruled that insurance company Factory Mutual could count on Live Nation’s losses due to the shutdown of the pandemic. US District Judge John Kronstadt The main decision concluded that it was possible for the presence of COVID-19 to cause “physical loss or damage” to the property and found that virus droplets could have physically damaged the property.
The MLB lawsuit, which seeks more than $1 billion in damages as a result of the pandemic, is similarly promising, especially since it was filed in state court where claims were made more liberally.
According John TomlinsonThe CEO of Gravitas Insurance last year introduced an entertainment venues policy that offers different levels of coverage for local government mandates. He says they have not been widely accepted, even though they are very expensive.
Brian Sullivan, an entertainment industry advocate who has represented policyholders, believes that those who choose COVID-19 coverage pay an additional 10 to 15 percent. “If this is a big enough production, the insurance could be as little as half a million to a million dollars,” he said. “If you do a Marvel movie, I’m sure it’s a lot more, like $10 million. It has an impact on those numbers. ”
A version of this story first appeared in the May 10 issue of The Gossipify. Click here to subscribe.
Source: Hollywood Reporter

Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.