A Connecticut, US state judge has refused to dismiss Covid-19 business interruption (BI) litigation filed against Zurich Insurance by a hotel chain seeking coverage for its Louisiana property, stating it has adequately alleged physical loss or damage.
New Castle Hotels filed suit against Zurich in state court in Hartford in March, seeking coverage for its properties in Maine, South Carolina, New York, Connecticut, Georgia and Canada, as well as its Fairfield Inn & Suites New Orleans Downtown, according to court papers in New Castle Hotels LLC v Zurich American Insurance Co.
As first reported in our sister publication Business Insurance, in its ruling, the court dismissed litigation for all but the Louisiana hotel, citing the coverage’s virus exclusion. Louisiana law does not allow the exclusion, Judge Thomas Moukawsher’s ruling said.
Zurich claims there is “nothing ‘physical’ about the loss or damage flowing from the Covid-19 virus”, the ruling said. “But can this merely be asserted to become true?”
Connecticut law “only requires a party to plead ‘a plain and concise statement of the material factors on which the pleader relies’. New Castle has done this”, the ruling states.
It alleges the virus “is a cause of real physical loss or damage to property” and “goes on to cite government and private sources to allege that the virus is extremely damaging to humans” and can linger on surfaces for up to three days.
“It further alleges that the physical dimensions of affected physical pieces of property can be microscopically damaged and changed by the virus,” the ruling states.
Zurich has asked the court to take judicial notice that the virus does not physically alter objects, the ruling said. It states, however, that “the court simply can’t take notice at this stage that the virus does not degrade physical objects on at least a microscopic level”.
“That question will have to wait for another day – on summary judgment perhaps or after trial. What matters for now is that physical damage is specifically alleged here,” the ruling said.
In a pointed remonstrance to courts that have ruled otherwise, Judge Moukawsher states: “The rush to judgment on the question of physical damage in some courts – without reasoning and without evidence – has been ill advised. For now, in this court, and for this policy, it would be wrong to rush,” the ruling said, permitting the litigation on New Castle’s Louisiana property to continue.
A New Castle attorney had no comment, while Zurich did not respond to a request for comment.
In August, Judge Moukawsher ruled a Connecticut Native American tribe can recover up to $2m in Covid-19 BI losses and cleanup costs under its $1.6bn coverage.
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