New Jersey Court Refuses to Dismiss Insurance Claim for Business Interruption Related to the Pandemic

A New Jersey state trial court denied an insurance company’s motion to dismiss an insured’s claim for coverage for its losses related to the pandemic. In Optical Services USA/JC1 v. Franklin Mutual Ins. Co., No. BER-L-3681-20 (N.J. Super. Ct. Bergen Cty. Aug. 13, 2020), the policyholders asserted that the business interruption policies they purchased were intended to protect their businesses from an “unanticipated crisis,” such as Governor Murphy’s stay-at-home order issued at the beginning of the pandemic. The insurer moved to dismiss the complaint, arguing that the policy terms required direct physical damage to the premises. Further, as there was no known instance of COVID-19 transmission or contamination within the insured’s premises, the insurer claimed there was no direct physical loss. The trial court questioned why the policy did not contain specific exclusions for pandemics and the insurer conceded that the policy did not contain a specifically applicable exclusion. The court found that there were unsettled questions under New Jersey law as to whether the loss of the functional use of the property was insured as a direct physical loss under an insurance policy. It concluded that the insured should be permitted to prove that the emergency closure orders by Governor Murphy constituted a covered loss under the policy.

National Apartment Association Sues CDC Over Eviction Moratorium

The National Apartment Association and the New Civil Liberties Alliance have joined forces in Richard Lee Brown, et al. v. Secretary Alex Azar, et al., a lawsuit filed in the United States District Court for the Northern District of Georgia, Atlanta Division which challenges the CDC’s eviction moratorium. As we reported in a prior issue, the CDC issued an eviction moratorium through December 31, 2020. It claimed it had authority to do so pursuant to the Public Health Service Act, which permits the agency to “make and enforce such regulations” that are necessary for the prevention of the introduction, transmission or spread of communicable diseases (such as the novel coronavirus). The groups argue that the CDC’s power to prevent the spread of communicable diseases involves “inspection, fumigation, disinfection, sanitation, pest extermination, and destruction of animals or articles believed to be sources of infection,” but that the issuance of the eviction moratorium was beyond its prescribed powers. The groups also claimed that, under the Administrative Procedure Act, the CDC’s order must be set aside as arbitrary and unreasonable, as it was not supported by a rational determination drawn from substantial evidence. They argued that, prior to taking measures under the Public Health Service Act, the CDC must show that local jurisdictions are taking insufficient measures to prevent the spread of the coronavirus and that it failed to do so. Additionally, they argued that in enacting the moratorium, the CDC failed to catalogue the efforts by any state or local jurisdictions to combat the pandemic or to explain why allowing eviction proceedings caused an increase in infection rates warranting agency action.

Additional information may be found here and a copy of the complaint be found here.

Heard Around the Industry

Confidence In The Construction Market Increased In The Third Quarter: The U.S. Chamber of Commerce Commercial Construction Index for the third quarter of this year showed slight increases in confidence in the construction market, as well as revenue expectations, as compared with the second quarter. The first quarter construction index, which tracks the period prior to pandemic related shutdowns, was 74. The confidence score within the construction market for that same period was 70. The construction index, as well as confidence in the market and revenue expectations, took a huge hit during the early months of the pandemic. During the second quarter, the construction index dropped to 56 and the confidence rating to 48. However, both numbers increased slightly in the third quarter, as the construction index went up to 57 and the confidence rating went up to 56. The increases reflect contractor’s confidence that the U.S. markets should provide ample new opportunities within the next year.