US restaurants lose Covid BI ruling in first state high court decision

The Massachusetts Judicial Supreme Court has joined federal appeals courts in ruling against policyholders in a Covid-19 business interruption (BI) case, and become the first state high court to decide the issue. The unanimous ruling was in a case filed by three restaurants in Boston and Cambridge under common ownership against Strathmore Insurance, a unit of Greater New York Mutual Insurance, according to the ruling in Verveine Corp et al v Strathmore Insurance Co et al. As first reported in our sister publication Business Insurance, the ruling affirms a trial court decision. The Massachusetts Supreme Court considered the case without first waiting for a state appeals court ruling on the issue. Like its federal appeal counterparts, the Massachusetts high court held that plaintiffs were not entitled to coverage because they had not established the virus had caused direct physical loss, as required by its policy. “We agree that the plaintiffs’ losses were not ‘direct physical loss of or damage to’ their property within the meaning of the insurance policies,” the decision states. “We conclude that no reasonable interpretation of direct physical loss of or damage to property supports the plaintiffs’ claim,” it adds. Direct physical loss “requires some ‘distinct demonstrable physical alternation of the property’”, the ruling says in citing an earlier case. “Every appellate court that has been asked to review Covid-19 insurance claims has agreed with this definition for this language or its equivalent,” it adds. “Even accepting the plaintiffs’ premise that the suspension of their business was caused by the ‘presence’ of the virus on surfaces and in the air at the restaurants (as opposed to the danger that the virus would be introduced to the restaurants for person to person if indoor dining were allowed), mere ‘presence’ does not amount to loss or damage to the property,” the ruling continues. Attorneys in the case did not respond to requests for comment. Meanwhile, insurance buyers have lost another Covid coverage ruling on appeal in the US. The 8th US Circuit Court of Appeals in St Louis issued its third ruling, holding that plaintiffs were not entitled to Covid-19 BI coverage, in a case filed by two restaurants and a dental practice against a WR Berkley unit. The litigation was filed by Monday Restaurants, which operates two St Louis restaurants, and a paediatric dental practice, according to the ruling in Monday Restaurants et al v Intrepid Insurance Co, et al. The four-page ruling, which affirms a decision by the US District Court of Appeals in St. Louis, states: “The insurer’s policies provide coverage for ‘direct physical loss of or damage to property’… Ultimately, the trigger has to be a ‘physical loss’, which the businesses here fail to allege.” Attorneys in the case did not respond to requests for comment. The 8th Circuit previously ruled in favour of insurers in United Hebrew Congregation of St Louis v Selective Insurance Co of America and in Oral Surgeons, PC v Cincinnati Insurance Co. In Logan Bauer v AGA Service Co, it ruled in favour of an Allianz unit in a putative class action suit filed by an individual plaintiff seeking compensation for personal insured travel plans that were cancelled because of the pandemic-related quarantine. For further news from Business Insurance, please click here.

US restaurants lose Covid BI ruling in first state high court decision

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