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Physical damage is not necessarily visible to the eye, a federal district court said last week, in refusing to dismiss a COVID-19 business interruption lawsuit filed by Alabama restaurants.
Three restaurant companies, including North Birmingham, Alabama-based Serendipitous LLC, had argued that the terms concerning “loss” under Cincinnati Insurance Co.’s coverage were ambiguous, according to Thursday’s ruling by the U.S. District Court in Birmingham in Serendipitous LLC/Melt et al. v. Cincinnati Insurance Co.
The insurer had argued the restaurants had not identified the physical loss or damage to property needed to trigger coverage, according to the ruling.
“The restaurants have alleged facts that, if proven, constitute actual physical loss of their buildings and furniture during the pandemic,” the ruling said.
“The fact that the COVID-19 virus has not physically altered the restaurants’ property does not mean that coverage necessarily is not available for impacts to the property that are invisible to the naked eye.
“The policy language indicates that the insurer understands that an insured may suffer physical loss without physical alteration of property because the policy excludes from coverage some expenses incurred because of invisible substances like vapor and fumes,” it said. “Cincinnati could have excluded invisible substances like viruses but did not,” the ruling said, in denying Cincinnati Insurance’s motion to dismiss the case.
A Cincinnati spokeswoman said in a statement, “We respect the legal process. As this case continues, we believe that the language of our policy contract will ultimately be enforced.
“Our commercial property insurance policies require direct physical loss or damage to property and do not provide coverage in this case.”
Plaintiff attorney James Williams, a shareholder with Sirote & Permutt P.C. in Birmingham, Alabama, said in a statement, “We are delighted with the Court’s ruling and look forward to proceeding with the lawsuit.”
Last week, a federal district court in Texas refused to dismiss a COVID-19 business interruption coverage lawsuit filed by the Cinemark movie chain, stating the company’s claim that the virus had damaged property was covered under its policy.
More insurance and risk management news on the coronavirus crisis here.