A Colorado state court on Wednesday refused to dismiss COVID-19 business interruption-related litigation filed by a senior living retirement operator against a CNA Financial Corp. unit.

It was the second decision this week by a state court that found in a policyholder’s favor in a COVID-19 business interruption case.

Denver-based Spectrum Retirement Communities LLC, which operates 43 senior living and memory care communities in the U.S., sued Continental Casualty Co., a CNA unit, in February 2021. The coverage provided by Continental included all-risk business interruption and extra expense coverage of $50 million, according to Spectrum Retirement Communities LLC et al. v. Continental Casualty Co.

The district court, city and county of Denver, found that “because the Complaint plausibly alleges that COVID-19 was physically present on and in each of Spectrum’s covered properties, making them unusable, inaccessible, and unduly dangerous to use, Spectrum has plausibly pled a direct physical loss.

“Subsequent health orders prevented the normal use of Spectrum’s covered properties and limited the ability of people to enter and exit the properties in the same way as before the properties were contaminated.,” the ruling said.

The court said that “under Colorado case law, ‘direct physical loss or damage’ does not require evidence of ‘tangible injury’ or ‘physical alteration’ of property.”

It cited the Colorado Supreme Court’s 1968 ruling in Western Fire Insurance Co. v. First Presbyterian Church, which held that direct physical loss occurred when gasoline that had accumulated around and under a church building seeped into the building’s structure and made its further use unsafe.”

“It is not decisive that the majority of courts across the country have found that COVID-19 does not constitute ‘direct physical loss.’ This court is bound by Colorado law and the specific policy language and the distinct factual allegations this case presents,” the court said in denying CNA’s motion to dismiss the case.

Plaintiff attorney Michael S. Burg, a shareholder with Burg Simpson Eldredge Hersh Jardine PC in Englewood, Colorado, said, “We’re in a unique situation because of the (Colorado) Supreme Court ruling that has a different definition than most jurisdictions do about the physical injury to the property.”

CNA did not respond to a request for comment.

A California appeals court on Wednesday reversed a lower court and reinstated a COVID19-related business interruption coverage lawsuit filed by a hotel and restaurant against an Allianz SE unit.