A magazine publisher is appealing a federal court ruling in favor of an insurer in a coronavirus-related business interruption dispute.

In the case Social Life Magazine Inc. v Sentinel Insurance Co. Ltd., the publishing firm filed a notice of appeal with the 2nd U.S. Circuit Court of Appeals on Sunday after a federal judge in New York denied its motion for a declaratory judgment that its policy should cover income lost due to the COVID-19 lockdown.

In one of the first court rulings on the issue, U.S. District Court Judge Valerie E. Caproni, in the Southern District of New York, said on Thursday that the policyholder’s attorney deserved “a gold star for creativity” but the loss was not covered under the policy issued by the unit of Hartford Financial Services Group Inc.

According to the original complaint, Social Life Magazine, which publishes a luxury lifestyle magazine, alleged that the coronavirus caused damage to its Midtown Manhattan office and prevented it from printing the magazine.

“Because plaintiff’s equipment is specialized and industrial in nature, plaintiff’s employees and independent contractors cannot telecommute or work from home to produce plaintiff’s product,” the complaint said.

The publisher filed a claim for lost income with Sentinel, citing the government-ordered restrictions on businesses in New York, but the claim has not been paid, court papers say.

According to a transcript of the hearing, which took place via teleconference last week, Judge Caproni grilled policyholder attorney Gabriel J. Fischbarg over the physical damage element of the claim.

After Mr. Fischbarg asserted that Social Life Magazine’s property had been damaged by the virus, the judge said, “There is no damage to your property. … It damages lungs. It does not damage printing presses.”

The lost income was due to government orders to remain home rather than damage to the property, the judge said.

In addition, even though the owner of the company contracted COVID-19, that was not evidence that the virus was present in the magazine’s office, the judge said.

Sentinel’s attorney, Sarah Gordon, a partner at Steptoe & Johnson LLP, said during the hearing that the policy had two requirements for coverage.

“There has to be direct physical loss or physical damage to the property and the cause of the business interruption damages they are seeking has to be direct physical loss or damage, and the cause here is not physical damage,” Ms. Gordon said.

Under New York law, business interruption coverage is not triggered because physical damage has not prevented the policyholder from entering the property, Judge Caproni ruled.

“I feel bad for your client. I feel bad for every small business that is having difficulties during this period of time. But New York law is clear that this kind of business interruption needs some damage to the property to prohibit you from going. You get an A for effort, you get a gold star for creativity, but this is just not what's covered under these insurance policies.”

In a statement on the ruling, a spokesman for Hartford said that while many businesses have closed due to government-ordered shutdowns, “Unfortunately, viruses are generally outside the scope of business interruption coverage due to the absence of any physical damage. These policies do not cover this exposure and, accordingly, premiums were never collected for it.”

The case is one of dozens in federal and state courts across the United States in which mainly small businesses are seeking business interruption coverage for coronavirus-related losses. In most of the cases the policyholders argue that the presence of the coronavirus in or around a property constitutes physical damage, which should trigger coverage for income lost due to government-ordered restrictions on business activities.

Last week, the Pennsylvania Supreme Court also ruled in favor of an insurer in a COVID-19 dispute when it refused to fast track a dispute to the high court’s docket.

More insurance and risk management news on the coronavirus crisis here.