This is another COVID-19 United States of America judgment where the court held that the plain and unambiguous language of the policy required the business property covered under the business interruption section of the policy to have sustained physical loss or damage.
The court said that the only loss the insured suffered was pure economic loss because of the government-ordered COVID-19 shutdown. The closure had nothing to do with the physical attributes of the covered properties. The insured never alleged that the COVID-19 virus was on the covered properties or caused any physical damage thereto during the government-ordered shutdown so as to trigger cover.
That has been the largely consistent approach of all American courts in dealing with COVID-19 business interruption claims where the policy invariably had no non-damage extension.
Usefully, the court also considered the extent to which “loss of use” might constitute a “physical loss”. That is an argument that is raised from time to time.
The court reviewing earlier judgments said that “loss of use” must still be physical for coverage to apply under the relevant policy:
“There can be physical loss without damage, such as the case of a landslide leaving a home standing on the edge of and partially overhanging a newly-formed 30-foot cliff without physically damaging the structure itself, . . . or a portable grill or a delivery truck being stolen without a scratch . . . . [T]he definition of the term ‘loss’ can include loss of use. But it does not follow that every loss of use is necessarily a physical loss, and . . . there was no physical loss here.”
Where insurers intend to provide business interruption cover only in circumstances of actual and direct physical damage or loss of the insured property, it is recommended that the wording makes that clear and excludes loss of use without actual physical alteration to or physical loss of the insured property. That will avoid any argument that, where the property insured is rendered useless or uninhabitable, there is still a physical loss because the insured has been deprived of tangible possession.