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Insurer hit with COVID-19 suits says virus doesn’t damage property

Billy Goat Tavern

The coronavirus does not cause damage to tangible property, therefore, income lost due to COVID-19 lockdowns is not covered by commercial insurance policies, an insurer facing multiple claims from restaurants and other businesses argued Monday.

Separately, another coronavirus business interruption suit was withdrawn on Monday.

In the case Rising Dough Inc., et al. v. Society Insurance, which was filed in April in U.S. District Court for the Eastern District of Wisconsin, the insurer filed a motion to dismiss, arguing that it is not obliged to provide coverage for coronavirus-related losses.

Fond du Lac, Wisconsin-based Society Insurance Co. is subject to various suits filed by restaurants and taverns in the Midwest, including the famed Billy Goat Tavern in Chicago, that closed following government-ordered restrictions imposed in March. The policyholders generally allege that the coronavirus pandemic caused direct physical damage to their properties, which triggers business interruption coverage under the civil authority clause in the policies, and that Society’s policies do not include virus exclusions.

In the Rising Dough case, which was filed as a proposed class action by a bakery and a restaurant chain in Madison, Wisconsin, Society seeks dismissal of the suit because “Plaintiffs’ premises and property were not physically damaged or destroyed. Plaintiffs were allowed and encouraged to continue takeout and delivery service. Plaintiffs were not prohibited from accessing their premises or producing their products,” court papers say.

In addition, the policies require “direct physical damage” to a covered property to trigger business interruption coverage and the pandemic has not caused harm to a tangible property, the insurer states.

“There has been no alteration in the structure or composition of Plaintiffs’ covered property, and therefore there has been no ‘direct physical loss of or damage to covered property at the described premises’ and no ‘Covered Cause of Loss’ within the meaning of the Society Policy,” court papers say.

In addition, the absence of a virus exclusion in the policy does not mean that virus-related losses are covered because “the existence or absence of exclusions is of no consequence if there is no initial grant of coverage,” court papers say.

Meanwhile, a coronavirus proposed class-action suit filed by a group of Pennsylvania personal injury lawyers against Erie Insurance Group in April was withdrawn. The case HTR Restaurants Inc. d/b/a Siebs Pub v. Erie Insurance Exchange had recently been moved to federal court from a state court in Pittsburgh.

More insurance and risk management news on the coronavirus crisis here