(Reuters) — A federal judge in Missouri said on Wednesday a group of hair salons and restaurants can sue their insurer for business interruption losses caused by the coronavirus pandemic, which they say caused a "direct physical loss" to their premises.

The decision against Cincinnati Insurance Co. by U.S. District Judge Stephen Bough in Kansas City appears to be the first victory for policyholders suing insurers for improperly denying claims related to shutdowns caused by COVID-19.

Insurers had won similar earlier cases in a Michigan state court and a Washington, D.C. court, successfully arguing that coverage was not warranted because the virus travels through the air and does not cause physical damage.

While not ruling on the merits, Judge Bough rejected Cincinnati Insurance's bid to dismiss the Missouri case.

He said the presence of COVID-19 was not a "benign condition," and the plaintiffs plausibly alleged that particles were a "physical substance" that attached to and damaged their property, rendering them unsafe and unusable.

Cincinnati Insurance is a unit of Cincinnati Financial Corp. Its lawyers did not immediately respond to requests for comment.

The plaintiffs' businesses are located in Missouri and Kansas. Their lawyers also did not immediately respond to requests for comment.

Business owners have filed hundreds of lawsuits claiming that their business interruption insurance, which typically offers coverage for losses from calamities such as fires or floods, should also cover a pandemic.

Insurers have countered that applying such coverage to COVID-19 losses would result in crippling payouts and deplete their capital.

Analysts have said the industry's coronavirus-related losses have so far been modest.

The Judicial Panel on Multidistrict Litigation is considering whether to consolidate hundreds of lawsuits seeking business interruption coverage for COVID-19.

The case is Studio 417 Inc. et al v. Cincinnati Insurance Co., U.S. District Court, Western District of Missouri. 

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