COVID-19 and Business Interruption Coverage in the United States: An Example of Judicial Regulation

Insureds in the United States have initiated thousands of lawsuits for business interruption losses caused by the COVID-19 pandemic. This litigation shows the significant regulatory role of the judiciary in the United States. Courts have developed and apply rules for insurance policy interpretation and for good faith behavior of insurers addressing claims. Although in the past the state and Federal courts applying judicial regulation have reached a variety of results, the judicial response to the COVID-19 claims has been surprisingly consistent in favor of insurers. The great majority of decisions have held that pandemic-related closures are not covered because they were not the result of physical damage or loss of property. This chapter describes the current state of the law in the United States for business interruption coverage for losses due to the pandemic. It suggests that the relative uniformity of decisions may reflect judicial concern that pandemic losses could overwhelm the insurance industry and an implicit recognition that the government is already providing substantial relief to businesses. It then identifies some procedural differences between judicial and administrative regulation for these determinations which results in a focus on individual cases rather than historical context and national public policy concerns.