An Arizona federal district court has ruled in a Chubb Ltd. unit’s favor and held a resort cannot recover its business interruption losses under its pollution liability coverage.

Lake Havasu City, Arizona-based London Bridge Resort LLC filed suit against Chubb unit Illinois Union Insurance Co. Inc. after it denied it coverage for its COVID-19-related revenue losses under the insurer’s premises pollution liability insurance policy, according to the ruling issued by the U.S. District Court in Phoenix Friday in London Bridge Resort LLC v. Illinois Union Insurance Co. Inc.

The district court cited an earlier ruling issued by the Arizona Supreme Court, in a case over the issue of whether fecal bacteria was covered under an insurance policy’s pollution exclusion clause, in ruling in Chubb’s favor, stating there was a “close connection between the two types of policies.”

“Although the public policy concerns for exclusion clauses are slightly different than for coverage policies, the idea that an overly broad definition of pollution could go beyond what is ‘reasonably expected to be insured’ can create absurd results applies to policies too,” the  district court said, in citing the Arizona Supreme Court ruling.

The question is “whether COVID-19, a type of virus, can constitute traditional environmental pollution. The court has little trouble concluding that no plausible interpretation of ‘traditional environmental pollution’ includes a virus outbreak.

“Furthermore, the Court does not find, and the parties do not provide, case law finding that virus outbreaks are considered traditional environmental pollution. To the contrary, the types of incidents courts have found to be traditional environmental pollution are substantially different than a virus outbreak,” the ruling said.

“Plaintiff argues COVID-19 constitutes traditional environmental pollution because different government agencies include ‘virus’ in the definition of certain contaminants and pollutants,” the ruling said. “However, a virus being considered a ‘containments’ pollutant’ in certain instances does not render a COVID-19 outbreak a ‘traditional environmental pollution,’” it said.

“Furthermore, a virus outbreak does not resemble the enumerated examples provided in the Policy’s definition,” the decision said, in ruling in Chubb’s favor.

Attorneys in the case had no comment or did not respond to a request for comment.

A Nevada state court has refused to dismiss COVID-19 business interruption litigation filed by a Las Vegas commercial real estate operator and owner against a Starr Insurance Cos. unit.

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