Judge Overrules AIG Unit in $5M COVID Coverage Suit: Luxury Mall Prevails in Ambiguous Policy Language Case

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According to the judge’s ruling, the terms “discharge, dispersal, release, and escape” in the Segerstrom policy must be interpreted to apply only to traditional environmental pollution, and not to coughing, breathing, or sneezing. The judge emphasized that Segerstrom’s policy explicitly covers outbreaks of communicable diseases, and that the “Special Time Element Coverage” serves a purpose similar to that of business interruption insurance, safeguarding against losses incurred when operations are disrupted without warning.

In her ruling, the judge looked to a 2022 California Court of Appeal decision related to San Francisco’s iconic restaurant John’s Grill and its battle with insurers over their decision to deny coverage for business interruptions during the COVID-19 pandemic. “Insurers cannot take in premium for a coverage grant that names a specifically covered risk — here virus contamination — and then justify denying coverage for it under all circumstances because some other risk may be covered under the same coverage grant,” states the ruling in John’s Grill, Inc. v. Hartford Fin. Servs.