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A New Jersey state court has refused to dismiss a COVID-19 business interruption case filed by a university against Factory Mutual Insurance Co., stating the institution has stated in their complaint the virus has caused physical loss “of the type allegedly covered by the policy.”
Rowan University, in Glassboro, New Jersey, which has 19,600 students, had sought coverage from Factory Mutual under its all-risk commercial property insurance policy, which includes communicable disease response coverage, according to the complaint in Rowan University v. Factory Mutual Co., which charges the insurer with breach of contract.
In denying Factory Mutual’s motion to dismiss the complaint, the three-page ruling by the Superior Court of New Jersey in Woodbury states that under a 1989 New Jersey Supreme Court ruling, Printing Mart v. Sharp Elecs. Corp., a complaint should not be dismissed if a “complaint’s facts suggest a viable cause of action.”
The ruling says paragraphs in the complaint “all allege physical loss or damage covered,” that COVID-19 is a physical substance and “properly alleges COVID-19’s cycle of infection.”
Factory Mutual “attempts to lead the Court to a higher standard of pleading than a Motion to Dismiss requires,” the ruling said. “The Court finds Plaintiff must only adequately plead breach of contract to survive this motion” and “is not required to prove every single fact alleged to the Court,” it said, in denying Factory Mutual’s motion to dismiss the case.
Factory Mutual said in a statement that it “values the long-term relationships we have with our policyholders and we are proud to be leading the industry for claims service. It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided.”
University attorney Allan Kanner, of Kanner & Whiteley LLC in New Orleans, said in a statement, “It was a textbook opinion by a well-respected judge.”
Policyholder attorney Scott D. Greenspan, senior counsel with Pillsbury Winthrop Shaw Pittman LLP in New York, who is not involved in the case, said the ruling “is an affirmation that New Jersey’s liberal pleading standard as enunciated” by the Printing Mart decision.
“It’s a reminder to New Jersey judges that you can’t determine facts in a motion to dismiss under Printing Mart. That comes later in the process after discovery is taken.”
It “sets the table” for a decision by the state appeals court, Mr. Greenspan said, noting other New Jersey state courts have ruled both for and against policyholders in comparable cases.
Mr. Greenspan also said it “shows the sharp dichotomy between state and federal courts” on the COVID-19 business interruption issue. All federal appeals courts that have issued ruling on the issue to date have ruled against policyholders.
Earlier this month, the federal appeals court in Atlanta issued another pro-insurer ruling in a COVID-19 business interruption case, while a New Mexico state court refused an insurer’s motion to dismiss another case.
A federal judge in North Carolina has refused to dismiss COVID-19 business interruption litigation filed by a health care system against a Zurich Insurance Group unit, ruling the system has adequately established physical losses, despite the coverage’s virus exclusion.