Vermont high court first to rule in policyholders’ favor in COVID litigation


The Vermont Supreme Court on Friday grew to become the first state high court to rule in policyholders’ favor in COVID-19-related business interruption litigation, holding in a divided ruling that the virus could have brought on direct bodily harm.

The 3-2 ruling in Huntington Ingalls Industries Inc. et al. v. Ace American Insurance Co. et al. overturned a trial court that had dismissed the lawsuit filed by the Newport News, Virginia-based firm, which is described in the ruling as the most important navy shipbuilding firm, and its Burlington, Vermont-based captive, Huntington Ingalls Industries Risk Management LLC, towards its reinsurers, which embrace Chubb Ltd. unit Ace American and quite a few others.

The determination follows pro-insurer rulings by state supreme courts in Iowa, Massachusetts, Oklahoma, South Carolina, Washington and Wisconsin, in addition to by many federal district and appeals courts on the problem.

The ruling held that the grievance sufficiently pleads that the virus causes direct bodily harm. “The virus causing COVID-19 has been continuously present at insured’s shipbuilding facilities” and adheres to surfaces, the ruling stated. 

“This technique of the virus ‘adhering’ to surfaces brought on ‘detrimental physical effects’ that ‘altered and impaired the functioning of the tangible material dimensions’ of the property, the ruling stated, in quoting the grievance. 

Because of this alteration, the property can’t perform for its meant functions, and to redress these bodily alterations the insured will take “steps that involve physical alterations to its insured locations,” reminiscent of putting in obstacles.

“Taken together, these statements in the complaint adequately allege that the virus physically altered property in insured’s shipyards when it adhered to surfaces,” the ruling stated, in reinstating the litigation and remanding the case for additional proceedings.

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The minority opinion acknowledged that “as matter of law, human-generated droplets containing SARS-CoV-2 cannot cause ‘direct physical loss or damage to property’ under this insurance policy. No future litigation can change that reality.”

Huntington Ingalls stated in an announcement, “We believe that the court correctly applied Vermont law with respect to pleading standards and insurance policy interpretation, and we thank the court for its careful consideration of the issues.  We look forward to proceeding with the case in the Vermont Superior Court.”

Commenting on the ruling, Marshal Gilinsky, a shareholder with  Anderson Kill P.C., in New York, who had submitted a quick supporting Huntington on behalf of United Policyholders, a policyholders advocacy group, stated in an announcement, “The Vermont Supreme Court’s meticulous reasoning and adherence to pre-pandemic precedent is a robust rebuttal to the too-common conclusion that the harm wrought by COVID-19 doesn’t represent ‘direct bodily loss or harm.”

Chubb stated in an announcement, “As a matter of policy, we do not comment on legal matters.”





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