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CNA Wins Second Circuit Appeal Over COVID-19 Business-Interruption Insurance Provisions

Paul, Weiss won a significant appellate victory on behalf of a CNA Financial Corporation subsidiary in a case concerning COVID-19 business-interruption insurance coverage. The appeal, Connecticut Children’s Medical Center v. Continental Casualty Company, presented the questions of whether business-interruption and disease-contamination provisions in commercial property insurance policies should be drastically expanded to cover income lost during the COVID-19 pandemic.

In a unanimous opinion, a panel of the U.S. Court of Appeals for the Second Circuit affirmed a Connecticut district court’s dismissal of the policyholder’s claims. The panel reaffirmed that the key policy language in two of the provisions—“direct physical loss” of property—refers to tangible alteration of property, and does not extend to the loss of use of property. The panel also held that the key policy language in a third provision required an order mandating decontamination or evacuation of the policyholder’s premises and that general public health orders issued during the pandemic did not trigger coverage. Litigation partner Kannon Shanmugam argued the appeal.

The claims in this case arise from the COVID-19 pandemic. The policyholder, which operates a pediatric hospital and affiliated medical practice, filed a claim for coverage of lost business income with Continental Casualty Company, a CNA subsidiary. After Continental denied the claim, the policyholder filed an action alleging breach of contract and seeking a declaratory judgment. Paul, Weiss, which represents CNA and its affiliates in similar cases around the country, was retained to assist. The district court dismissed the suit in January 2022, and the policyholder appealed.

The win is the ninth appellate victory for Paul, Weiss on behalf of CNA and its subsidiaries in COVID-19 business-interruption litigation.

In addition to Kannon Shanmugam, the Paul, Weiss appellate team included litigation partner Christopher Boehning and counsel Daniel Levi.

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