Courts have begun issuing decisions concerning insurance coverage for Covid-19 claims. Kenney & Sams anticipated back in March 2020 that insurers would likely deny business interruption insurance claims related to Covid-19 because such policies generally require evidence of a direct physical loss to property to trigger coverage. The Suffolk County Superior Court, Business Litigation Session, reached just that conclusion in a recent decision.
In Verveine Corp. v. Strathmore Insurance Company, Judge Sanders of the BLS held that an insurer was not required to provide coverage under a business interruption policy to restaurants whose business had been severely impacted by Covid-19 and related government restrictions. In Verveine, the owners of Boston restaurants Coppa and Toro, and Cambridge restaurant Little Donkey, sued over their insurer’s refusal to provide coverage for claims related to Covid-19 closures under business interruption policies.
The trial court ruled in the insurer’s favor, finding that the policies are designed to cover only losses related to actual physical damage to the restaurants’ premises. The court held that the policies were unambiguous, and “cannot therefore be construed to cover physical loss in the absence of some physical damage to the insured’s property.” The court noted that the restaurants’ losses were caused primarily by the government’s orders related to Covid-19, which it ruled was outside the scope of the business interruption policies.
The plaintiff restaurants attempted to analogize their situation to cases where business interruption coverage limited to direct physical loss was triggered by incidences where fumes or other dangerous contaminates prevented businesses from operating. The court, however, disagreed that the situation was similar, noting that Covid-19 was not actually present at any of the three plaintiff restaurants. This part of the decision appears to leave the door open to potential coverage in cases where businesses were forced to shudder because of an actual case of Covid-19 being present at the business. However, the trial court notably did not state that the actual presence of the virus would have triggered coverage.
Insurance claims related to Covid-19 will continue to be analyzed on a case-by-case basis, based on the language in the policy at issue and the circumstances surrounding each claim. However, for coverage that requires a direct physical loss, this early ruling indicates that Covid-19 related losses likely will not be covered.