Another appeals court rejects Covid BI coverage

The 10th US Circuit Court of Appeals in Denver joined five other federal appeals courts on Tuesday in holding that there is no Covid-19-related business interruption (BI) coverage.

The Denver-based appeals court ruled against Oklahoma City-based Goodwill Industries of Central Oklahoma Inc, in a lawsuit it filed against Tokio Marine Holdings unit Philadelphia Indemnity Insurance Co. Goodwill was seeking BI coverage after it halted its operations in March 2020, following an executive order by the Oklahoma governor, according to the decision in Goodwill Industries of Central Oklahoma Inc v Philadelphia Indemnity Insurance Co. The ruling affirmed a November 2020 ruling by the US District Court in Oklahoma City.

Goodwill’s policy said it would pay for the suspension of operations caused by direct physical loss or damage, and included a virus exclusion, according to the appeals court ruling.

The district court granted Philadelphia Indemnity Insurance Co’s motion to dismiss the case on the grounds that “a direct physical loss unambiguously requires a showing of tangible damage”, which Goodwill had failed to allege, and under the policy’s virus exclusion.

In affirming the lower court ruling, a unanimous three-judge appeals court panel said: “The business income provision unambiguously covered any losses stemming from physical alteration or tangible dispossession of property. Neither occurred here. The policy’s ‘period of restoration’ clause reinforces this conclusion.

“So do the decisions of every other circuit and the vast majority of district courts to address this issue,” continued the panel, which also held that the virus exclusion was valid and enforceable.

Attorneys in the case did not respond to requests for comment.

The ruling affirms similar rulings issued by the 6th US Circuit Court of Appeals in Cincinnati, the 7th Circuit in Chicago, the 8th Circuit in St Louis, the 9th Circuit in San Francisco and the 11th Circuit in Atlanta.