State supreme courts in both Massachusetts and Iowa ruled that businesses cannot recoup losses caused by the Covid-19 pandemic through property insurance policies.
Last Thursday, April 21, the Massachusetts Supreme Judicial Court became the first state supreme court to say restaurants could not recover losses through their property insurance.
In a unanimous ruling, the court found the restaurant’s losses did not stem from a “direct physical loss of or damage to property” within the meaning of the policies. Writing for the court, Justice Scott Kafker said the policy language required a distinct physical alteration, which the virus did not do.
Iowa’s high court reached a similar ruling a day later. The Iowa Supreme Court ruled that the inability of Wakonda Club and Jesse’s Embers restaurant in Des Moines to use its facilities fully after state restrictions in 2020 did not trigger insurance coverage.
“The mere loss of use of property, without more, does not meet the requirement for a direct physical loss of property,” the Court said.
The state rulings mark new defeats for businesses across the U.S. who filed lawsuits seeking to cover billions of dollars from all-risk property insurance after the government imposed lockdowns and restrictions on social gatherings in 2020. Most of those rulings were by federal courts interpreting state law.
In April 2020, the American Property Casualty Insurance Association estimated that small businesses were incurring $255 billion to $431 billion in monthly Covid-19 losses.
Chivaroli and Associates Insurance Services is a full-service brokerage firm specializing in the custom-design and placement of insurance and alternative risk funding solutions for your healthcare organization.