Insurers on Winning Streak with Covid-related Business-Interruption Cases

In a winning streak for insurance companies, the Washington Supreme Court became the fifth state supreme court to rule in favor of insurers in Covid-related business interruption litigation.

The unanimous ruling found that a Washington dental practice had not suffered the direct physical loss required in order to make a claim on its coverage. The court ruled that it is “unreasonable to read ‘direct physical loss of …property’ in a property insurance policy to include constructive loss of intended use of property.”

The dental practice, which had filed a suit against Mutual of Enumclaw Insurance Company, was not unable to “physically use the property at issue,” the court explained. It was “still functional and able to be used, and (no one) was prevented from entering the property.”

The court found that the policy did not cover losses by a “virus or bacteria.”

In a similar recent decision, the U.S. District Court for the District of Massachusetts held that Covid-19 shutdown orders do not fall under the definition of “direct and physical loss to property” in a business interruption insurance policy. These rulings are a victory for insurers in general, who have been fighting similar lawsuits across the country.

After more than two years of pandemic-related issues and closures, false starts, and failed attempts to return to “normal,” most of the country seems to be reopening for business as of June 2022.

With this ruling, insurers will likely continue denying claims for pandemic-related business interruptions, and businesses will continue to be responsible for their losses. The ruling could increase economic hardship for many businesses that have struggled during the pandemic.

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