Wade Clark Mulcahy LLP

In March of 2020, the Governor of New Jersey issued a series of Executive Orders requiring entertainment businesses to close indefinitely due to the COVID-19 pandemic.  See 2024 WL 2763762, at 3 (D.N.J. May 29, 2024).  Subsequently, the Governor issued additional Orders affirming the closures.  Id. at 4.  Count Basie submitted a claim to its insurer, Zurich, seeking coverage for its business losses from the closure.  Id.  The Policy’s Business Income Coverage (“BI Coverage”) stated Zurich would cover up to $1,900,001 of business losses from suspending operations due to “direct physical loss.”  Id. at 1.  The Communicable Disease Business Income Coverage (“CD Coverage”), in contrast, provided $100,000 per occurrence for loss of business income “caused by an order of … [a] governmental authority” which prohibits access to the premises.  Id. at 2.

On review, the District Court of New Jersey held that Count Basie’s losses triggered the Policy’s CD Coverage, but only for $100,000 of the claimed damages.  In so holding, the Court rejected three of Count Basie’s arguments.  First, Count Basie argued the $1,900,001 limit of the BI Coverage could be applied to losses under the CD Coverage form due to ambiguity in the Policy language. Id. at 6.  Evaluating the CD and BI Coverages’ respective limits, the Court found no ambiguity and that Count Basie’s proposed application would conflate two distinct forms of coverage.  Id. at 7.

Second, Count Basie argued each Order constituted a separate “occurrence” triggering the Policy’s business income coverage.  Id. at 8.  To determine the number of “occurrences,” New Jersey courts must consider whether “one proximate, uninterrupted, and continuing cause” produced all the claimed damages.  Id.  Applying this test, the Court concluded the Orders, albeit individual, were all issued as part of New Jersey’s continuing response to the pandemic.  Id. at 9.  Thus, Count Basie’s losses stemmed from one cause—the spread of COVID-19.  Id.

Finally, Count Basie contended the $100,000 limit could be applied on a per premises basis, as the CD Coverage form limited coverage to any one “premises.”  Id. at 10.  However, the Court emphasized the language of the Policy’s Declarations, which explicitly stated the CD Coverage limits would be determined on a per occurrence basis.  Id. at 11.  Moreover, had the Policy intended to create a per premises requirement for the CD Coverage, it could have done so—as it did for several other coverage limits.  Id.