Travelers Casualty Insurance Company recently filed a lawsuit in the Central District of California in Los Angeles. This suit was in response to a policyholder lawsuit against Travelers seeking business interruption coverage for COVID-19 related losses, filed by a Los Angeles plaintiff attorney on April 9th.
Travelers is seeking a Declaratory Judgment from the court, hoping for a court ruling that virus-related losses are not covered by the business interruption coverage found in Travelers business owners (BOP) policies involved in the underlying lawsuit.
In a motion for declaratory judgment, the party making the motion is seeking a court determination of the rights of the parties, in this case, the right to deny business interruption coverage to policyholders. The motion does not seek any other award of damages. This type of legal strategy is often used in insurance coverage disputes, where the insurance carrier wishes to sanction its coverage position by a ruling from the court. In such coverage disputes, the insurer is asking the court to reaffirm that the policy does not provide the insurance coverage being sought.
Should Travelers prevail in its declaratory judgment, the case will be hailed in the insurance industry as confirmation of the industry position that the business interruption coverage found in most standard commercial business income and extra expense policies, is not designed to respond to COVID-19 business shut-down claims.