Page 18 - BusinessWest May 30, 2022

A Matter of Policy
COVID Business-interruption Suits Are Finding Mixed Results
By Michael Roundy
Since early in the COVID-19 pandemic, businesses small and large have been seeking insurance coverage for business
losses incurred when the virus or governmen- tal orders forced them to close their doors. Although policyholders have enjoyed mixed results, the outcome of insurance coverage lawsuits ultimately turns on the particular lan- guage of the policy at issue.
Two common provisions have become the primary focus of many of these suits: The physi- cal damage requirement, and the virus exclusion. Cases continue to turn on the precise language used in these provisions, or on the absence of the provisions from the policy at issue. As more cases work their way through the state and fed- eral courts, certain outcomes have become more predictable.
Many cases have turned on the requirement,
included in most but not all policies, that the
coverage-triggering event must have caused
“direct physical loss of or damage to” the prop-
erty. Policyholders have argued that the physical
harm or loss requirement is met in the COVID
context because the virus itself is in the air at
the business and physically changes the air, air- cleaning and disinfection and the need for clean- spaces, property, and property surfaces, that ing does not constitute a “direct physical loss.” require cleaning to remediate the harm, which Even so, not all policies include the same
has directly led to the loss of use of the property “direct physical loss” language.
Courts, in their analyses, have placed empha- sis on the immediacy of the word “direct” such that the absence of the term — a policy requiring only “physical loss” — may provide an opening for insured parties to argue for coverage despite
“
primary focus of many of these suits: The physical damage requirement, and the virus exclusion. Cases continue to turn on the precise language used in these provisions, or
for its intended business purposes. Insurers, on the other hand, have repeat-
edly argued that physical loss or damage must include some form of tangible damage or physi- cal alteration to the property itself, rendering the property damaged or
unusable such that it must be either dis- carded, replaced, or repaired.
For the most part, courts have agreed with the insurers on the interpretation
Two common provisions have become the
of physical damage
provisions, and have
dismissed COVID
coverage suits on the
grounds that while
the virus may contaminate surfaces, it does not damage them and therefore does not trigger the business interruption coverage that policyhold- ers are seeking. Courts have held that even if the virus has contaminated certain surfaces, the con- tamination can easily be eliminated by ordinary
on the absence of the provisions from the policy at issue.”
the ever-expanding string of losses on the issue. Other policies, less commonly, may lack the
“physical loss” or “physical damage” requirement altogether. Careful and thorough analysis of pol- icy language may reveal the availability of claims typically dismissed, depending on the specific language used.
However, even those cases that survive the physical-
Interruption
Continued on page 20
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