Law360 is providing free access to its coronavirus coverage to make sure all members of the legal community have accurate information in this time of uncertainty and change. Use the form below to sign up for any of our weekly newsletters. Signing up for any of our section newsletters will opt you in to the weekly Coronavirus briefing.
Sign up for our Corporate newsletter
You must correct or enter the following before you can sign up:
Thank You!
Law360 (June 29, 2021, 10:03 PM EDT ) A Mississippi federal judge on Tuesday nixed an educational consulting firm's bid for COVID-19-related business interruption coverage after determining that a virus exclusion within its insurance policy from Sentinel Insurance Co. forecloses the firm's coverage claim.
In a nine-page order granting the insurer's motion to dismiss, U.S. District Judge Daniel P. Jordan III ruled that beyond the virus exclusion found in Sentinel's policy, The Kirkland Group did not demonstrate that it suffered a direct physical loss and therefore is not entitled to insurance coverage.
The judge further tore into Kirkland's argument that the coronavirus should qualify as a "specified cause-of-loss," which, among other things, encompasses falling objects and explosions. According to the education firm, COVID-19 can enter the premises by way of "an explosion, such as an explosive cough or sneeze."
But Judge Jordan found that Kirkland's attempt to qualify COVID-19 under that definition, no matter how creative, was ultimately a stretch.
"While a sneeze may contain the virus, it does not cause it," the judge wrote in his order. "The novel coronavirus is not the 'result of a specified cause of loss.'"
"The Court joins those courts from across the country that have found the virus exception applicable, even when coupled with a limited virus endorsement," the judge continued.
Mississippi-based Kirkland held a property-insurance policy from Sentinel that extended coverage for both property damage and business interruption, according to court documents.
Kirkland alleged that coverage kicked in once Mississippi Gov. Tate Reeves issued two executive orders in response to the coronavirus crisis, one which shut down public schools, the other of which directed Mississippi residents to avoid large social gatherings.
These orders prevented the public from accessing its business, which made it eligible for business-interruption coverage, according to Kirkland.
But after Kirkland submitted its claim, Sentinel denied it and purportedly failed to carry out a "proper investigation," according to court documents. Kirkland then sued Sentinel last August, arguing that the insurer breached its contract by declining to cover Kirkland's claim.
The judge did not buy that argument on Tuesday, however, and pointed to the insurance policy itself to show why Kirkland's claim is ineligible for coverage.
Under the policy, virus-related claims are applicable if the virus stems from either a "specified cause of loss" or, alternatively, equipment breakdown.
"The latter is not asserted, and Sentinel contends that the virus did not result from a 'specified cause of loss,'" the judge said.
As for Kirkland's construction of terms such as "explosion" or "falling objects", Judge Jordan did not think that its "creative construction" passed muster.
"Kirkland's constructions of the terms 'explosion' and 'falling objects' are simply unreasonable, especially when the policy is 'considered as a whole, with all relevant clauses together,'" the judge said.
The question of whether businesses are incurring physical damage from the pandemic worthy of loss coverage has fueled litigation as business owners face off against insurers in court over pandemic-related loss claims.
In the Western District of Missouri, a judge ruled in August that the presence of the virus made a property unusable and, therefore, triggered a physical loss. But in Georgia federal court, a judge ruled that shutdowns alone don't warrant such coverage.
Counsel for the parties did not immediately respond to Law360's requests for comment on Tuesday.
The Kirkland Group is represented by Tina M. Bullock of Whitfield Coleman Bullock PLLC.
Sentinel is represented by Thomas Julian Butler of Maynard Cooper & Gale PC.
The case is The Kirkland Group, Inc. v. Sentinel Insurance Company Ltd., case number 3:20-cv-00496, in the U.S. District Court for the Southern District of Mississippi.
--Additional reporting by Jeff Sistrunk and Shawn Rice. Editing by Peter Rozovsky.
For a reprint of this article, please contact reprints@law360.com.
