Commercial Division Blog

Posted: December 20, 2021 / Written by: Jeffrey M. Eilender, Thomas A. Kissane, Samuel L. Butt, Joshua Wurtzel, Channing J. Turner / Category Commercial Division Justices

Business Loss Insurance Policy Does Not Cover COVID-19 Business Interruption Losses Where Policy Requested Physical Loss

On November 30, 2021, Justice Margaret Chan of the New York County Commercial Division entered a decision in SJ 1st St. Hotel, LLC v Sompo Am. Ins. Co., 2021 N.Y. Slip Op. 32558, dismissing an insured's complaint against an insurance company for failing to cover loss of income to a business due to shutdowns caused by the COVID-19 pandemic where the insurance policy covered loss for the closure of businesses due to a direct physical loss, stating:

The gist of plaintiffs' complaint is that the pandemic brought about by COVID-19, which prompted Shelter-in-Place orders resulted in their inability to operate their businesses or, in other words, loss of use of their businesses. Plaintiffs' attempts to fit 'loss of use' into a direct physical loss are unpersuasive at best as are plaintiffs' attempts to sway the interpretation of a clear and unambiguous policy into one infused with confusion that interplays civil authority orders and the viruses. At bottom, the Policy requires physical loss or damage to trigger the myriad of coverage provisions plaintiffs cite, and the Policy has a virus exception even if plaintiffs differentiate the SARS from COVID-19 viruses. Finally, plaintiffs' speculation that discovery is needed goes back to the physical loss or damage issue they postulate, which neither COVID-19 nor the civil authority orders caused, and plaintiffs do not point to any physical damage to their property.

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