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Posted on Apr 16, 2020 in Articles

By: Jonathan Adelman

Most businesses are experiencing financial losses due to Covid-19 and shelter in place orders.  Those with business interruption insurance are likely disappointed to have learned that “civil authority” clauses, which cover losses due to a government order, typically require corelating property damage or the threat of the same.  Furthermore, business interruption polices routinely do not cover losses resulting from disease and/or pandemic.  So, where does that leave you?  Some companies might initially want to blame their insurance agents for not procuring an insurance policy which covers losses associated with what many businesses are now experiencing.  However, in Georgia, prevailing on such a claim is an uphill battle.  The Georgia Court of Appeals very recently clarified longstanding law and held the following:  “In general, an insured has an obligation to read and examine an insurance policy to determine whether the coverage desired has been furnished . . . [,and] the policyholder[‘s] failure to examine the policy bars coverage against the insurer or its agent for failure to provide coverage.”  Martin v. Chasteen, A19A1980, 2020 WL 1239488 (2020).  There are, of course, exceptions to this rule.  “[W]hen the agent has held himself out as an expert and the insured has reasonably relied on that agent’s expertise to identify and procure the correct amount or type of insurance,” a claim could exist.  However, that exception is inapplicable if a review of the policy would have made it “readily apparent” that coverage did not exist.  Traina Enterprises v. Cord & Wilburn, Inc. Ins. Agency, 289 Ga. App. 833, 837 (2008).  A determination of what is “readily apparent” must be viewed from a layperson’s perspective, not an insurance expert’s.  Atlanta Women’s Club v. Washburne, 207 Ga. App. 3, 5 (1992).  A second exception exists when a special relationship of trust exists between the insured and the agent, but only if the agent undertook some separate fiduciary obligation outside of simply procuring coverage and was negligent in the undertaking.  Traina Enterprises, 289 Ga. App. at 838-839.  Simply put, if your company simply asked your insurance agent to procure business interruption insurance and did not obtain an “expert” opinion about whether the policy would cover a pandemic, the Georgia courts would likely not hold the insurance agent liable if it turns out that the policy excluded coverage for damages arising from a pandemic.

This generic legal analysis is being offered for informational purposes only.  The specific facts and insurance policies applicable to your situation may require findings different than those suggested above.  This is not being offered as a substitute to seeking legal counsel regarding any specific issues.