The judge overseeing the case detailed on this page has granted the defendant’s motion to dismiss, ruling that the plaintiff’s losses were not caused by physical loss or damage to her property and were therefore not covered under the terms of her insurance policy.
In dismissing the suit on July 26, U.S. District Judge Mark G. Mastroianni found that the language in the plaintiff’s MAPFRE policy unambiguously states that coverage for business losses is only triggered by physical loss or damage to the insured property. The plaintiff, the judge noted, alleged that her losses stemmed from government orders issued as part of “a generalized public health response” and not as a result of the virus’s physical presence in the woman’s salon. Because the plaintiff has not shown that the coronavirus was found on her property or that the government stay-at-home orders stemmed from the virus’s physical presence there, the woman’s losses cannot be traced back to physical damage to her property and therefore do not fall under her policy’s coverage provisions, the judge stated.
Judge Mastroianni further held that even if the court were to find that the coverage provisions did apply to the plaintiff’s case, her policy contained a virus exclusion that bars coverage for damages caused directly or indirectly by a virus.
“There is no question that the state orders restricting Plaintiffs [sic] operation of her business were issued in response to the spread of the COVID-19 coronavirus, thus any losses flowing from those orders were indirectly caused by the COVID-19 coronavirus,” the judge wrote. “Dismissal is, therefore, appropriate.”
A proposed class action claims MAPFRE Insurance Company and College Highway Insurance Agency, Inc. have wrongfully refused to pay claims for business losses stemming from the COVID-19 pandemic.
Filed by the owner of a Westfield, Massachusetts hair salon, the lawsuit says the plaintiff was forced to close her doors to customers in mid-March due to government orders issued in response to the COVID-19 outbreak. The plaintiff claims that although her business losses should have been covered under the salon’s property insurance policy, the defendants verbally informed her of their intention to deny her claim, as well as those of similarly situated businesses.
According to the case, the plaintiff’s policy provided civil authority coverage and coverage for business interruptions due to property damage. Moreover, the all-risk policy purported to pay for all covered losses unless a loss is specifically excluded, the suit says.
Although the plaintiff’s insurance policy contained an exclusion for viruses, the lawsuit argues that the exclusion—which was drafted using standardized language developed by the Insurance Service Office (ISO)—was “never intended by the ISO nor Defendants to pertain to a situation like the present global Pandemic.” Per the complaint, the virus exclusion was developed in response to the SARS outbreak around 2005-2006, which the case notes was not a pandemic, and was only permitted by state insurance departments based on “misleading and fraudulent statements” by the ISO that property insurance policies were not intended to cover losses caused by viruses.
“To the contrary, before the ISO made such baseless assertions, courts considered contamination by a virus to be physical damage,” the complaint states. “Defendants’ use of the Virus Exclusion to deny coverage here shows that the Virus Exclusion was fraudulently adopted, adhesionary, and unconscionable.”
The lawsuit further asserts that the virus exclusion in the plaintiff’s policy applies only to “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.”
As such, the virus exclusion does not apply to the current situation because, according to the case, the plaintiff’s losses were not “solely caused by a virus, bacterium or other microorganism.” Instead, the plaintiff’s losses stemmed from the closure of her business due to orders issued by a civil authority, which is a covered loss under the policy, the suit argues.
“The Policy does not exclude the losses suffered by Plaintiff and therefore, the Policy does provide coverage for the losses incurred by Plaintiff,” the complaint contends.
The plaintiff looks to represent all salons that have suffered business interruption and lost income as a result of civil authority orders issued in response to the COVID-19 pandemic.