Independence Barbershop LLC v. Twin City Fire Insurance Co.
The United States District Court for the Western District of Texas denied an insurer’s motion to dismiss a barbershop plaintiff’s complaint for failure to state a claim last week, which asserted that the policy’s virus endorsement provides for coverage for up to 30 days of business interruption due to the COVID 19 pandemic. The court ruled that facts plead in the plaintiff’s complaint met the requisite standard of plausibility to survive a 12(b)(6) motion to dismiss. Twin City Fire Insurance Co. argued that the use of the word “virus” in the subject endorsement, titled “Limited Coverage for Fungi, Wet Rot, Dry Rot, Bacteria and Virus”, was limited to the definition of the word virus as it relates to the rotting of wood and construction materials, and not to events such as the COVID-19 pandemic. Though the court threw out the plaintiff’s other arguments, including an invocation of regulatory estoppel, this case will survive to join the ranks of COVID related coverage cases marching toward trial across the country. It is important to note that if the court finds the term “virus” to be ambiguous as it exists in the endorsement, it is well settled Texas law that such an ambiguity must be resolved in favor of the insured.