The New York State Court of Appeals, NY’s highest court, has affirmed the Appellate Division’s order in the COVID-19 business interruption case between Consolidated Restaurant Operations (CRO) and Westport Insurance Corporation – the latter ultimately emerging victorious in the disputed claim.
Prior to the case reaching the Appeals Court, the Supreme Court and the Appellate Division had ruled in favor of the insurer, declaring that CRO’s “all-risk” commercial property insurance policy did not cover the alleged losses. Westport had argued that CRO could not establish that the coronavirus caused direct physical loss or damage to its restaurants as a matter of law.
“This appeal presents the question of whether allegations that SARS-Co-V-2, the virus that causes COVID-19, was present in insured restaurants and resulted in cessation of in-person dining services and related business interruption losses are sufficient to state a claim for ‘direct physical loss or damage’, as that phrase is used in plaintiff’s property insurance policy,” Judge Halligan said in the February 15 court document seen by Insurance Business.
“We hold that direct physical loss or damage requires a material alteration or a complete and persistent dispossession of insured property, which petitioner has not alleged. We therefore affirm the order below dismissing the complaint.”
Judge Halligan also stated: “We do not take lightly the severe economic losses incurred by restaurants and other businesses serving the public as a result of the COVID-19 pandemic. But our task is to faithfully interpret the terms of the insurance policy before us, not to ‘rewrite the language
of the policy at issue’ to reach a result with ‘equitable appeal’…
“The coverage provisions relied upon by CRO only cover economic losses to the extent they are caused by ‘direct physical loss or damage’ to insured property. We conclude that the business interruption caused by the actual presence of the coronavirus on the premises of CRO’s insured property, as alleged in the complaint, is insufficient to trigger such coverage.”
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