A Colorado senior living operator may continue to pursue a lawsuit against its insurer claiming reimbursement for loss incurred due to COVID-19-related business interruptions, a state court decided last week.
The court denied the insurer’s motion to dismiss the case, brought by Spectrum Retirement Communities, a 43-community operator based in Denver. The company may plausibly plead a “direct physical loss” from COVID-19, the court said, because the disease was “physically present on and in each of Spectrum’s covered properties, making them unusable, inaccessible, and unduly dangerous to use,” Business Insurance has reported.
Spectrum’s policy included coverage for business interruption and extra expense coverage of $50 million, according to its complaint, filed in 2021 against Continental Casualty Co., a unit of CNA Financial Corp.
The senior living operator may have benefitted from a unique situation, its attorney told the insurance news outlet. The state’s Supreme Court “has a different definition than most jurisdictions do about the physical injury to the property,” said Michael S. Burg, a shareholder with Burg Simpson Eldredge Hersh Jardine PC in Englewood, CO.
The majority of courts nationally have found that COVID-19 does not constitute “direct physical loss,” the Colorado court said in denying Continental’s motion. But “[t]his court is bound by Colorado law and the specific policy language and the distinct factual allegations this case presents.”
Other courts have noted a “bleak track record” for companies that pursue pandemic-related claims, according to a recent report by Law.com. This was the second decision in a week by a state court favoring a policyholder’s case claiming COVID-19 business interruption, according to Business Insurance. The other case involved a California hotel and restaurant.
Meanwhile, long-term care operators have found themselves the defendants in a growing number of lawsuits over alleged negligence and wrongful deaths related to COVID-19, McKnight’s Senior Living has reported.
