Forget the days of commoditized work, low billing rates and heavy-handed client control (i.e. insurance defense up until, oh, February). Insurers are suddenly springing for top-shelf litigators to wage high-profile battles testing COVID-19 coverage limits.

The industry's latest champion? O'Melveny & Myers trial practice chair Daniel Petrocelli, who is representing Chubb Group in a fight with the Simon Wiesenthal Center over lost income from cancelled events including a dinner honoring George and Amal Clooney.

(Though really, how do you put a price on missing a glitzy night with George and Amal at the Beverly Hills Hilton? I hate awards banquets, but I'd have been first in line for that one, eating my rubber chicken with stars in my eyes.)  

In asserting that the Wiesenthal Center's property insurance policy doesn't cover losses from the cancelled events, Petrocelli is echoing arguments made by Gibson, Dunn & Crutcher's Ted Boutrous in a separate pending case on behalf Travelers, as well as adding his own spin. 

"The economic and societal disruption arising from the coronavirus pandemic confronts everyone, including not-for-profit organizations dedicated to the common good, with extraordinary challenges," Petrocelli wrote last week in a motion to dismiss. "But the exigencies and engendered sympathies of the current crisis provide no basis to discard contractual language and short-circuit the judicial process."

In late April, the Wiesenthal Center and its film division Moriah Films sued Chubb in the Central District of California, seeking a declaratory judgment that they're owed coverage.

They kicked off the litigation with a brutal press release that basically accused the insurer of facilitating hate crimes.

"By betraying the trust of the Simon Wiesenthal Center, Chubb has, quite literally, harmed the fight against hate crimes around the world," said Gauthier Murphy & Houghtaling's John Houghtaling, who represents the center along with Larry Russ, Nathan Meyer and Justin Maio of Russ, August & Kabat. 

Rabbi Hier, the founder, CEO and president of the Wiesenthal Center and its Museum of Tolerance added, "We sought to insure a hallowed public space that brings together all segments of our society to build bridges of understanding and coalitions for a better America. By denying the protection we paid for, Chubb has halted and harmed our work."

Their actual legal arguments, though, don't pack quite the same punch.

The center's lawyers note that its insurance policy is all-risk—which means it covers direct physical loss or damage to property unless the loss is specifically excluded or limited. And viruses or pandemics were not excluded from the policy. 

So far, so good. But does COVID-19 actually cause direct physical loss or damage?

"The coronavirus creates a physical impact and loss on property as it alters surfaces, limiting or prohibiting the intended use of property and causing a dangerous property condition," the center's lawyers argue. "The coronavirus, like a bacterium, clearly has a material existence and is something that exists in nature that physically damages tangible property by rendering it unusable as it adheres to surfaces creating a dangerous property condition."

They added that the Wiesenthal Center, "as insureds in the non-profit, human rights industry, did not reasonably expect that any exclusion in their policy would prevent coverage from physical loss or damage caused by a global pandemic that results in suspension of their entire businesses and threatens their very existence."

So look, Chubb is never is going to win the moral high ground over the Simon Wiesenthal Center. But it might be enough if they can just avoid coming across as actively evil in refusing to pay up.

With a minimum of fuss, Petrocelli attacked the center's complaint to devastating effect. 

Per the plain language of the contract, to get coverage under the "Civil Authority" provision of the policy, the center has to show "that there was 'direct physical loss or damage' to another property within one mile of the policyholder's property," he asserts. "Plaintiffs do not identify any property that actually sustained 'direct physical loss or damage,' much less allege that such property satisfies the proximity requirements of the policy."

Second, Petrocelli continued, they failed to show access to their property was prohibited.

"Third, to trigger Civil Authority coverage, it is not enough that a civil authority issued an order prohibiting access (which was not done here)," he wrote. "The order must also be the direct result of direct physical loss or damage to another property within one mile of the policyholder's property. Plaintiffs allege no facts to satisfy this additional policy requirement."

Those are some pretty big hurdles to overcome.

In a similar case in the Southern District of New York, plaintiff Social Life Magazine lost the first round in a suit against Sentinel Insurance Co. when U.S. District Judge Valerie Caproni in a telephonic hearing on May 14 declined to issue a preliminary injunction.

"What is the damage?" Caproni asked plaintiffs counsel, solo practitioner Gabriel Fischbarg, according to a transcript of the proceedings. "There is no damage to your property."

"Well, the virus exists everywhere," he responded.

"It damages lungs. It doesn't damage printing presses," the judge said.

Fischbarg tried again. "[T]he virus, when it lands on something and you touch it, you could die from it."

Caproni replied," That damages you. It doesn't damage the property."

Sentinel counsel Sarah Gordon from Steptoe & Johnson agreed. "The cases where there is direct physical loss or damage, you literally cannot be on the premises because there is something there that is making it uninhabitable, and here that just isn't true."

In denying the motion for a preliminary injunction, Caproni was sympathetic but firm.

"I feel bad for every small business that is having difficulties during this period of time," the judge said. "But New York law is clear that this kind of business interruption needs some damage to the property to prohibit you from going. You get an A for effort, you get a gold star for creativity, but this is just not what's covered under these insurance policies."