Society Insurance, restaurants take Covid-19 coverage war to Wisc. high court

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A restaurant worker is seen behind an empty counter at Mickies Dairy Bar in Madison, Dane County, Wisconsin, U.S., November 5, 2020. REUTERS/Bing Guan

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  • Society seeks to undo unfavorable ruling on business-income interruption coverage
  • Decision on what constitutes ‘property loss’ will also impact federal MDL

(Reuters) - The Wisconsin Supreme Court will hear argument Tuesday in Society Insurance’s appeal from a rare loss in a case by businesses seeking coverage for lost income and extra expenses related to the Covid-19 pandemic and government-issued “stay at home” orders.

Society is challenging a February 2021 ruling by Judge Laura Gramling Perez in Milwaukee, which allowed Colectivo Coffee Roasters and Tandem Restaurant to proceed with their potential class action for coverage under the business-income interruption, civil authority, and contamination clauses of their policies.

Contrary to the overwhelming majority of federal and state rulings so far – including 100% of the federal appellate rulings – Perez found the policy’s promise of coverage for “direct physical loss of or damage to covered property” was ambiguous and could reasonably be interpreted to include loss of use.

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While Society’s other arguments “may well bear fruit down the road,” Perez said, it would be inappropriate to consider those arguments at the motion-to-dismiss stage.

Jay Urban of Urban & Taylor, lead attorney for Colectivo and Tanner, emphasized the “unique to Wisconsin” features of the case in an email Monday.

“Society writes more coverage for Wisconsin bars and restaurants than any other insurance company … and they do so by selling and marketing a special ‘all risk’ policy that is unique to Society,” he said. Among other things, Society’s policies don’t expressly exclude coverage for losses from viruses, and have a contamination clause that “requires coverage even without a physical loss or damage,” Urban said.

Federal courts have dismissed about 94% of lawsuits involving policies that lack an express virus exclusion, while state courts have dismissed about 72%, according to March calculations by the COVID Coverage Litigation Tracker at the University of Pennsylvania Carey Law School.

Society’s insurers at von Briesen & Roper and Crowell & Moring did not respond to requests for comment on Monday. In their appellate briefs, they argued that none of Colectivo or Tandem’s alleged losses met the policy’s requirements.

Crowell & Moring also represents Society in the multidistrict litigation (MDL) created in October 2020 for cases filed against the insurer in federal courts in six states, including Illinois and Wisconsin, which is pending before U.S. District Judge Edmond Chang in Chicago.

While Chang also found that “direct loss of property” arguably included loss of use under the relevant states’ laws, the 7th U.S. Circuit Court of Appeals found otherwise last December in two Illinois cases involving policies from different insurance companies.

Chang has not yet decided what effect, if any, the 7th Circuit’s interpretation of Illinois law should have on the MDL.

The case to be heard Tuesday is Colectivo Coffee Roasters et al. v. Tandem Restaurant et al., Wisconsin Supreme Court, No. 2021AP000463.

For Colectivo et al.: Jay Urban of Urban & Taylor and Richard Schulte of Wright & Schulte

For Society Insurance: Heidi Vogt, Beth Kushner, Janet Cain, and Christopher Avallone of von Briesen & Roper; Laura Foggan of Crowell & Moring

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