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Businesses suing insurers for billions in losses from Covid-19 shutdowns are entering a new phase: jury trials.

Over the past year, judges have ruled in favor of insurers in hundreds of cases, backing up the carriers’ rejections of “business interruption" insurance claims. Many of those rulings have involved policies with virus-specific exclusions, which can make the cases more open-and-shut for judges.

But last month, a jury in federal court in Kansas City, Mo., heard a restaurateur duke it out with a unit of Cincinnati Financial Corp. in a case without the virus-specific exclusion. It was the first coverage dispute, out of more than 1,800 Covid-19 lawsuits filed so far, to reach jurors, according to a Covid-19 litigation-tracking effort at the University of Pennsylvania Carey Law School.

While Cincinnati Financial still won, the trial signals that policyholders may be entering a new phase, in which their cases survive early motions to dismiss and get a fuller hearing than they have generally gotten so far.

The plaintiffs in this new wave are expected to feature some large companies and organizations, such as Major League Baseball, a far cry from the local restaurants and other small businesses that so far have dominated action. And these big clients in many instances are represented by law firms with deep experience in insurance-coverage disputes, potentially setting the stage for some dragged-out, high-stakes legal fights.

Large companies often have tailored policies, which don’t always have the boilerplate virus-specific exclusion that is common in policies sold to smaller businesses, said Tom Baker, a Penn law-school professor who runs the litigation-tracking project.

In the Major League Baseball lawsuit, the league, its 30 clubs and affiliated entities argue that they lost billions of dollars when revenue plummeted from ticket sales, concessions, parking and in-ballpark merchandise sales, among many other sources of income. They say they had “top flight," “all risks" policies in place, under which business-interruption proceeds are due.

The law firms are bulking up their filings to try to counter the arguments that insurers have made so far in winning 637 motions to dismiss or for summary judgment, compared with 72 policyholder wins, according to the Penn data.

“We’re seeing increasingly detailed allegations," Mr. Baker said.

Insurance-industry lawyers say they remain confident they will continue winning. Given business-interruption coverage is a subset of property insurance, they assert that policy language requires “direct physical loss or damage" to the insured property, such as from a fire, for a claim to be covered.

“In the vast majority of cases, insurers did not price policies to include business-interruption losses due to pandemics, and policyholders did not pay for it," said Claire Howard, general counsel for the American Property Casualty Insurance Association, a trade group.

Four federal appellate courts in recent weeks have backed up a half dozen of the early judicial rulings. A California appellate court this week gave insurers another significant win. The panel of judges concluded the plaintiff, a California hotelier, lost business because of government shutdowns, not damage from the virus on the property.

An example of the litigation’s new face was on display in a federal-court hearing in Roanoke, Va., last month. There, a lawyer with a policyholder law firm argued against an insurer’s motion for dismissal of a suit brought by a large Virginia healthcare system, Carilion Clinic.

The lawyer emphasized the need for continued proceedings to delve into the science of how Covid-19 might damage property. Carilion argues it lost income when elective procedures weren’t performed. The policy didn’t have the boilerplate virus-specific exclusion.

Scott Greenspan, one of Carilion’s lawyers, with Pillsbury Winthrop Shaw Pittman, told the judge that the research supports his side’s contention that Covid-19 transforms the content of the air, making it hazardous and causing the requisite property damage. He drew on past judicial rulings favorable to policyholders involving ammonia leaks, asbestos fibers, methamphetamine odor and even cat-urine odor.

Gabriela Richeimer, a lawyer for a unit of Zurich Insurance Group AG, told the judge that such rulings involved property left “completely uninhabitable," which wasn’t so with Carilion’s facilities.

The ruling is pending.

In the Missouri case, an epidemiologist for KC Hopps Ltd. used data on the virus’s spread in the Kansas City area to argue that the virus likely was inside the company’s bars and restaurants, rendering them contaminated. An expert for the insurer countered that the epidemiologist hadn’t specifically tested the premises.

The insurer’s lawyers cited an “ordinance or law" exclusion, which they said excluded losses stemming from the government-ordered shutdowns.

The jury’s verdict form provided no details as to its reasoning in deciding for Cincinnati.

Both sides declined to comment about the case.

Covid-19 business-interruption lawsuits have shaped up to be one of the biggest fights the insurance industry has ever waged with policyholders. A lesson for policyholder lawyers is “if you get to a jury, you won’t necessarily win," Mr. Baker said.

This story has been published from a wire agency feed without modifications to the text

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