The Covid-19 insurance litigation continues in the United States of America.

The matters are now reaching the appeal courts.

In this September 2023 Nevada Supreme Court judgment the appeal court overturned the lower court’s decision to allow the case to proceed.

The court found that the Covid-19 virus did not constitute “direct physical loss or damage” to the insured’s property that would trigger cover under its “All Risks” commercial property insurance policy.

The insurer did not dispute scientific evidence presented by the insured showing that the virus can attach to property for days and cannot be removed by routine cleaning. The court said that assuming the evidence is accurate it still did not show that the insured’s property was “subject to the type of material, tangible harm, constituting direct physical loss or damage, under its policy”.

The court said that the presence of the virus “indicates mere placement” on the property rather than “actual physical harm required to trigger coverage.”

The court, citing previous authorities, said that the presence of the virus does not “alter the appearance, shape, colour, structure, or other material dimension of the property.”

The court said that “physical” had to mean something and the court could not base coverage on economic loss alone. Even in loss of use or “uninhabitability” of property cases there was some physical impairment or harm in the properties involved. In those cases included cover for the presence of carbon monoxide, cat urine odour, and a brown recluse spider infestation which arose from and became entwined with the subject property. 

In dismissing the claim, the court said that the fact the virus was present in or on the property did not establish that there was any physical harm to the property as the policy required.

The policy also contained a pollution and contamination exclusion.

The exclusion applied to a “virus” so that, even if the insured was otherwise covered, the insured’s claims for losses resulting from Covid-19 were excluded from coverage.

The judgment continues a trend of the American courts across the different States of dismissing Covid-19 insurance claims which rely on the argument that the presence of the virus constitutes a “direct physical loss or damage” to the insured property.

The many American judgments now on this point contain useful and extensive analysis and reviews of what may constitute physical loss or damage in specific circumstances and is of broader assistance to insurance parties in all risk, property, construction, and engineering policy wordings.