A New Jersey federal judge has denied a lawsuit by specialty children’s apparel company The Children’s Place (TCP), which sought a declaration that Zurich American Insurance Company must pay the retailer for pandemic-related business losses.
US District Judge Esther Salas said that she would only enforce the retailer’s Zurich policy terms as they are written. According to the decision, the losses suffered by TCP do not amount to physical damage that would have triggered Zurich coverage.
“Ultimately, the court concludes that TCP fails to establish its claim for insurance coverage under the policy’s basic terms — specifically, the court rejects TCP’s arguments that its insurance claim based on COVID-19 falls under the policy’s property damage, time element, or special coverages provisions in dispute,” the decision said.
Salas’ decision granted Zurich’s motion for judgment on the pleadings, Law360 reported.
TCP had claimed that the presence of COVID-19 within 1,000 feet of its insured locations triggers the property damage and “time element” (losses for the time business was interrupted) provisions of Zurich’s policy.
But in her decision, Salas said that “critically,” TCP does not allege any tangible or physical losses to its stores. The decision also noted that TCP also failed to present any proof that the virus was present in its stores and in the surrounding areas.
“Because TCP’s alleged losses are not causally connected to the physical condition of its stores, TCP’s claim for insurance coverage falls outside the policy’s scope,” the judge’s decision prefaced.
Salas also rejected TCP’s argument that it had incurred covered losses related to its inability to use its stores during the government-mandated lockdown orders – orders which led to the shutdown of more non-essential businesses.
According to the judge, the government mandates were due to the virus rather than physical loss of or damage to TCP retail locations. Salas also noted that the retailer’s complaint only referenced shutdown orders in New York City, New Jersey, and Los Angeles.
TCP operates around 900 stores in the US, Canada, and Puerto Rico.
Salas additionally refuted TCP’s claim that it was entitled to recoup its losses under Zurich’s special coverages provision by rejecting the retailer’s claim that damage to properties other than its stores would trigger coverage.
“TCP’s arguments fail because it does not allege physical loss of or damage to any specific third-party property covered under the policy. Moreover, for reasons already stated, even assuming COVID-19 or the virus existed on non-TCP property, neither constitute physical loss or damage to third-party property.”
