Hedge Funds Are Investing in COVID-19 Business Interruption Claims

Contact an NJ Insurance Lawyer at Herold Law, P.A. to Help You Resolve Conflicts With Your Insurer.

According to a Wall Street Journal article, multiple hedge funds are making bets on COVID-19 business interruption claims.

The early days of the COVID-19 pandemic spurred many lawsuits against insurance companies. Relying on the language of business interruption insurance policies, insurance companies denied many claims for losses that businesses suffered when they were forced to shut down due to the pandemic. Currently, there are tens of billions of dollars worth of outstanding lawsuits against insurance companies regarding this issue.

Caesars Entertainment filed a $2 billion lawsuit against its insurance company for its losses during the COVID shutdown. It sold $330 million of this claim to Avenue Capital for 10 cents on the dollar. This is just one of many transactions in which Avenue Capital has purchased parts of COVID-related lawsuits. The hedge fund intends to commit $500 million to these transactions.

Additionally, claims have been filed by restaurants, health care companies, and other businesses because they were forced to close their doors during the lockdown. The National Restaurant Association (NRA) estimated that the industry lost nearly a quarter of a billion dollars in sales in 2020 alone. In addition, health care providers could not see patients in person, and many could not substitute virtual appointments to recoup the money. Accordingly, many of these businesses have tried to recover from their insurance company.

In these business interruption lawsuits, courts have examined the exact language of the insurance policy. Many insurance companies believe that a business interruption loss is only triggered when direct physical damage occurs; the COVID-19 shutdowns did not constitute direct physical damage.

From a plaintiff’s perspective, they can partially hedge themselves and may end up with some money, even if they lose their lawsuit. Additionally, hedge funds have been known to be activists in litigation and investing. This may push lawyers to take an even more uncompromising and aggressive stance.

Contact an NJ Insurance Lawyer at Herold Law, P.A. to Help You Resolve Conflicts With Your Insurer

Getting an insurance company to review and pay your claim promptly is not easy, especially if you are going through the process without a lawyer on your side. If you need help with an insurance claim, a skilled New Jersey insurance lawyer at Herold Law, P.A. can represent your interests. For more information, call us at 908-647-1022 or complete our online form to schedule an appointment. With offices in the Plainfield area, including Warren, New Jersey, we proudly serve clients across New Jersey.