On August 19, 2021, in a first-of-its-kind ruling, the United States District Court for the Eastern District of Virginia granted class certification to a statewide class of Virginia businesses in a COVID-19 insurance recovery class action. The Court granted class certification to a class of at least 111 Virginia businesses that, between March 23 and June 20, 2020, submitted insurance claims to State Farm for pandemic-related business losses. The losses stemmed from the COVID-19 restrictions put in place in Virginia that required many recreational businesses to close—and then only permitted them to reopen at limited capacity with strict guidelines in place. While the Court denied named plaintiff Elegant Massage’s motion to certify a statewide class of 19,300 Virginia businesses that had State Farm all-risk insurance policies, ruling that the class was overbroad and untenable, the Court also rejected State Farm’s argument that the case should be dismissed because it properly excluded coverage under the policy’s virus exclusion.
While State Farm may appeal this ruling, this case may prove to be a tone setting decision that opens the door for courts to certify class actions for policyholders in similar COVID-19 related insurance recovery cases. A policy’s virus exclusion may be insufficient for insurers to avoid having to cover certain business losses caused by the pandemic. As a result of this decision, and with over 130 similar class action lawsuits currently pending across the country, insurers should take notice now and prepare a strategy with experienced defense counsel to argue against the certification of similar class action claims.