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Court dismisses ‘outlier’ COVID-19 suit against Berkshire unit

Posted On: Feb. 25, 2021 2:50 PM CST

Court dismisses ‘outlier’ COVID-19 suit against Berkshire unit

A federal district court in Boston agreed to dismiss a COVID-19 business interruption case filed by a real estate company against a Berkshire Hathaway Inc. unit, stating it is joining other courts that have also agreed to dismiss similar “outlier” cases.

SAS International Ltd., which operates a real estate business in Fall River, Massachusetts, filed suit against Berkshire Hathaway Group Inc. unit General Star Indemnity Co. after it refused to indemnify SAS for COVID-19-related business interruption losses, according to the Feb. 19 ruling by the federal district court in SAS International Ltd. v. General Star Indemnity Co.

“This dispute turns on the meaning of the phrase ‘direct physical loss of or damage to’ property, which cabins the Policy’s scope of coverage,” the ruling said.

“Taken together, these terms require some enduring impact on the actual integrity of the property at issue. In other words, the phrase ‘direct physical loss of or damage to’ doesn’t encompass transient phenomena of no lasting effect much less real or imagined reputational harm,” it said.

“Moreover, reading the phrase ‘direct physical loss’ in the context of the Policy underscores the lack of coverage for losses arising from a virus.”

The policy excludes remediation for the presence of bacteria, the ruling said. “A construction of the policy that covers losses related to COVID-19 yet excludes losses arising from substances of a similar nature – e.g., biological microscopic parts - is unreasonable. By extension, the absence of an express (virus)  exclusion does not operate to create coverage for pandemic-related losses,” it said, citing a 2003 case.

The ruling concluded that “numerous cases have endeavored to stretch the terms of insurance policies to their limits in the wake of the widespread losses caused by COVID-19. … In fact, courts have also uniformly declined to follow outlier cases that have allowed complaints containing similar allegations to survive dismissal. The court will follow suit here.”

Attorneys in the case did not respond to requests for comment.

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