Contributors Andrew Roberts Senior Associate Litigation & Trial Practice andrew.roberts@alston.com Arianna Clark Senior Associate Litigation & Trial Practice arianna.clark@alston.com 5 Life Insurance The Importance of Grammar ECB USA Inc. v. Chubb Insurance Co. of New Jersey, No. 22-10811 (11th Cir. Aug. 29, 2024). The Eleventh Circuit gave a lesson on the use of commas. Accounting firm ECB sought coverage under a professional services liability policy for alleged negligence in auditing a food services company. Chubb’s policy provided coverage for“services directed toward expertise in banking finance, accounting, risk and systems analysis, design and implementation, asset recovery and strategy planning for financial institutions.” The parties presented competing canons of construction and grammar to dispute whether “for financial institutions” qualified all of the preceding items in the list. ECB argued that the “last-antecedent canon” and the “nearest-reasonablereferent canon”commanded that the phrase“for financial institutions” only refers to the immediately preceding phrase. Chubb asserted that under the “series-qualifier canon,” the phrase “for financial institutions” modified all the terms in the list of parallel items. Chubb’s canon won. The court agreed that the policy did not cover accounting services for non-financial institutions. It found that the last-antecedent canon and the nearest-reasonable-referent canon were not on point and were usually associated with different types of speech. Chubb was also aided by an exception under New Jersey law to the doctrine of contra proferentem: ambiguous policy language will not necessarily be construed against the insurer when the insured is a sophisticated party. The court noted that Chubb’s reading would have been clearer if there were a comma before the phrase “for financial institutions.” This is an important reminder to insurers to carefully consider grammar when drafting policies, especially when drafting lists of items. Coverage 4 Coverage No Coverage for COVID Business Interruption in Many States … Ungarean v. CNA, Nos. 11 WAP 2023, 12 WAP 2023 (Pa. Sept. 26, 2024). MacMiles v. Erie Insurance Exchange, No. 10 WAP 2023 (Pa. Sept. 26, 2024).1 John’s Grill Inc. v. The Hartford Financial Services Group Inc., No. S278481 (Cal. Aug. 8, 2024). In September, the Pennsylvania Supreme Court issued long-awaited rulings on whether two commercial insurance policies provided coverage for economic losses stemming from COVID-19 government mandates. The court found that the losses did not constitute “direct physical loss of or damage to” the property, precluding coverage under that policy language. The court found that this language unambiguously required a physical alteration to the property that necessitated repairs, rebuilding, or entirely replacing property. It rejected the argument that the installation of hand sanitizing stations and partitions constituted an alteration. California’s Supreme Court held in August that a limited fungi, bacteria, or virus coverage endorsement unambiguously did not provide coverage for a restaurant’s COVID-19 business interruption. The court found that a reasonable insured would understand the endorsement to provide only limited virus-related coverage when “the ‘fungi,’ wet or dry rot, bacteria or virus”results from certain specified causes that were listed in the endorsement (such as water damage and other “traditional named perils identified in insurance industry forms for commercial property insurance coverage”). These cases join at least 20 insurer-friendly rulings in COVID-19 business interruption coverage disputes by state supreme courts, while many other states’ highest courts have yet to rule. 1 Alston & Bird represented Erie Insurance Exchange and served as its national coordinating counsel for COVID-19 business interruption litigation. … But North Carolina Nixes the Trend North State Deli LLC v. The Cincinnati Insurance Co., No. 225PA21-2 (N.C. Dec. 13, 2024). Against the overwhelming weight of authority nationwide, the North Carolina Supreme Court held in December that business closures due to COVID-19 restrictions constituted a covered “direct physical loss.” The plaintiffs, several North Carolina bars and restaurants, were required by government order to close temporarily or limit services to carry-out and delivery. They sought coverage under materially similar “all-risk” commercial property insurance policies and business income coverage endorsements for their lost business income and extra expenses. The court found that the restaurants made a reasonable argument that losing physical use of property could constitute a “direct physical loss.” The court walked through several layers of context for that phrase, including the distinct use of the terms “loss” and “damage,” the specific exclusions of certain kinds of government zoning regulations and ordinances, and that 82.83% of other business insurance policies contained virus exclusions (indicating what policyholders understood as the universe of perils). Key to the holding was the principle of contra proferentem—the court found that the phrase had a range of reasonable interpretations and construed it against the insurer. The court acknowledged the numerous other courts that have held differently. It remains to be seen whether North Carolina will continue to stand alone.
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