In Oregon a Shakespeare festival was forced to cancel shows because wildfire smoke filled the outdoor theatre. They sought to recover under their policy for loss of profits.
The policy covered ‘direct physical loss of or damage to covered property’. There was no dispute that it was ‘covered property’ but the insurers contended that the air inside the theatre was not property and cancellations due to poor quality air were therefore not covered.
Even if air is not often visible to the naked eye it has physical properties like the smoke, soot and ash. The plain meaning of the term ‘physical’ did not impose a limitation nor imply there must be damage to the building itself. The court found that poor air quality constituted physical damage.