Covid-19 claim rejected because of virus exception (US)

Patrick Bracher, Norton Rose Fulbright

A Kentucky US district court rejected the business interruption insurance claim of a retail business specialising in sale of outdoor sportswear and equipment for losses suffered as a result of government restrictions following the outbreak of Covid-19. The all-risks policy covered physical loss and damage but excluded damage caused directly or indirectly regardless of any other cause or event by the presence, growth, proliferation, spread or any activity of fungi, wet rot, dry rot, bacteria or virus unless it resulted in a specified cause of loss which were in the nature of special perils.

The court rejected the argument that grouping ‘virus’ with things that are not disease-causing agents must be read to include coverage in the context of a global pandemic.  There was no requirement in the policy language that the virus activity had to be at the covered premises.  The insured’s claim was caused by the government’s executive order and was thus indirectly caused by a virus regardless of any other cause.  The claim was rejected.

This case is not reported because of its relevance to Covid-19 claims (of which there are many conflicting decisions in the US) but to show the application by the court of the ordinary meaning of the exception.

[J & H Lanmark Inc v Twin City Fire Insurance Company case no. 5:20-333-DCR US Eastern District Court of Kentucky]

First published by: Financial Institutions Legal Snapshot