Florida’s Third District Court of Appeal has upheld a decision denying coverage to IMC Property Management and Maintenance, Inc. (“IMC”). The appellate court affirmed a lower court’s ruling in favor of Westchester Surplus Lines Insurance Company, rejecting IMC’s claim that its business interruption losses due to government-mandated shutdowns were covered under its policy.
The dispute arose after IMC, a property management company, was forced to close its commercial properties in March, April, and May of 2020 due to statewide COVID-19 shutdown orders. Seeking financial relief, IMC submitted a claim to Westchester Surplus Lines Insurance Company under its business interruption coverage. The insurer denied the claim, leading IMC to file a lawsuit seeking a declaratory judgment on the policy's applicability.
At the heart of the case was an endorsement in IMC’s policy titled "non-physical damage business interruption." This provision included coverage for business losses resulting from a shutdown order due to a "hazardous condition" at “the premises of the insured.”
IMC argued that the government’s COVID-19 shutdown orders should trigger coverage under this clause. However, Westchester maintained that the policy only applied when a shutdown order specifically targeted IMC’s premises due to a localized hazardous condition, not broad government-imposed restrictions.
The appellate court, agreeing with the trial court’s interpretation, ruled that the plain language of the policy did not support IMC’s claim. The judges emphasized that the phrase “the premises of the insured” consistently appeared in multiple sections of the endorsement and required a direct connection between a shutdown order and specific conditions at IMC’s locations.
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The court found that Florida’s COVID-19 shutdown orders were issued as general public health measures and not due to any hazardous conditions unique to IMC’s properties. Because IMC could not establish that its premises were specifically cited as a reason for closure, the court ruled that the insurance policy did not apply.
The decision aligns with numerous similar rulings across the country, where courts have consistently rejected business interruption claims based on COVID-19 shutdowns unless there was physical damage or a specific health-related threat at the insured location. The ruling reinforces that insurance contracts must be interpreted based on their explicit language and that broad public health measures do not necessarily meet the conditions for business interruption coverage.
IMC's loss in court means the company will not receive insurance payouts for its COVID-19-related closures. The ruling serves as another reminder that policyholders seeking business interruption coverage must closely examine the specific wording of their insurance contracts. While IMC could still seek a rehearing, the decision marks a clear victory for insurers facing similar claims stemming from pandemic-related shutdowns.
