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Florida businesses, with the exception of those in Palm Beach, Broward and Miami Dade County, have likely re-opened, or begun to reopen, their businesses pursuant to Governor Ron DeSantis’ phased reopening approach that began on May 4, 2020. However, most businesses are dusting off not only the cashier registers and table tops, but also their insurance policies to review their business interruption coverage as the COVID-19 pandemic, and civil authority orders issued in response to curb its transmission, forced many businesses to shutter their doors or operate in some limited capacity.

Florida businesses have already filed suits against their insurers seeking a declaration of their rights under their insurance policies as to whether their losses, incurred as a result of civil authority orders issued due to COVID-19, are covered under the business interruption policy provisions and endorsements of their commercial policies. El Novillo Restaurant, as one example, filed a lawsuit asserting they “suffered a direct physical loss of and damage to their property due to the suspension of their operations from the global COVID-19 pandemic and the civil authorities’ measures to stop the human to human and surface to human transmission of COVID-19.” El Novillo Rest d/b/a DJJ Rest. Corp. et al v. Underwriters at Lloyd’s London, No. 20-21525 S.D. Fla. April 9, 2020. Located in Miami, Florida, El Novillo pled they were forced to either close their business or suspend business operations due to the civil authority orders issued by Miami Dade Mayor, Carlos Gimenez, restricting restaurants to operation times from 6am to 11pm, and later ordering all restaurants be closed, other than for deliveries only.

Florida Courts have made distinctions between business interruption and reduction in business. In Hotel Prop., Ltd v. Heritage Ins. Co. of Am., 456 So.2d 1249 (Fla. 3d DCA 1984), a restaurant housed within a hotel, but not the hotel itself, suffered a loss as a result of a fire, and a jury found there was no coverage for business interruption due to the reduced occupancy the hotel experienced due to the restaurant’s closing. The Court, affirming the jury’s verdict, noted “diminution of business did not constitute an interruption of the appellant’s business within the policies in question.” Hotel Prop., Ltd., 456 So.2d at 1250. It is possible the Florida courts, after review of the civil authority orders which limited access to businesses like El Novillo—but still permitted them to operate in some capacity, such as permitting take-out or deliveries that complied with social distancing mandates—may deny relief under the business interruption provision of the policy because these are cases of reductions in revenue, not business interruption.

Most businesses may also find difficulty in overcoming the hurdle of demonstrating there was “direct, physical damage” to property in the business as a result of COVID-19, as these terms, or some similar variation, are typically included in most business interruption policy provisions. Florida case law has adopted the general rule that “where policy language is subject to differing interpretations, the term should be construed liberally in favor of the insured and strictly against the insurer.” State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So.2d 1072 (1998). These terms (direct, physical damage), however, have been construed somewhat narrowly in the Florida Courts and have been limited to losses to real or personal property. See Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. Texpak Grp N.V., 906 So.2d 300 (Fla. 3d DCA 2005) (“typically, business interruption and related coverage in a property insurance policy limited protection to interruption of business ‘which is caused by property loss or damage which was itself produced by a peril covered in the property protection provisions.’”)

Florida courts have stated that “losses covered by this type of insurance [business interruption insurance] should be determined in a practical way, having regard for the nature of the business and the methods employed in its operation, in order to give practical effect to the intentions of the parties and the purpose of the insurances as evidenced by the terms, conditions, and provisions of the policy.” Travelers Indem. Co. v. Kassner, 322 So.2d 80 (Fla. 3d DCA 1975). Perhaps, with the magnitude of COVID-19, and its reverberating effects, Courts may consider allowing coverage under business interruption policies because doing so would be in-line with the purpose of such policy provisions and endorsements.

It appears such considerations of the purpose of business interruption clauses are leading to some states, like New Jersey and New York, to propose bills that would mandate business interruption insurance claims be covered because of events such as the COVID-19 pandemic, despite policy exclusions. The constitutionality of this proposed legislation is still being debated. Florida has not weighed in on the issue yet, and it is likely Citizens Property Insurance Corporation, a government entity created pursuant to Section 627.351(6) who also issues commercial policies, will also be a factor that would be considered if Florida decides to join states like New Jersey and New York in advocating for mandating business interruption claims.

While many things are in doubt, what is certain is that business interruption claims will be made and that litigation will ensue as a result of claims denials based on policy exclusions.