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The Wisconsin Supreme Court overturned a rare ruling in policyholders’ favor in COVID-19-related business interruption on Wednesday, and unanimously joined two other state supreme courts in ruling a group of restaurants were not entitled to COVID-19 business interruption coverage.
The ruling by the Wisconsin Supreme Court overturned a circuit court ruling, according to the decision in Colectivo Coffee Roasters, Inc. et al. v. Society Insurance, a Mutual Co. society’s motion to bypass the state court of appeals had been granted in the case.
In denying the restaurant’s coverage, the ruling said, “The provisions of Society’s policy on which Colectivo relies, with the exception of the contamination provision, all require Colectivo to allege a direct physical loss of or damage to either its property or a surrounding property.”
The ruling said, “An insured suffers a physical ‘loss’ of its property when the property is ‘destroyed’ or affected to such an extent that it cannot be repaired.”
Colectivo’s arguments do not allege “a tangible harm to Colectivo’s physical property necessary to trigger coverage,” it said. On the contamination issue, the court said the state’s emergency orders prohibiting in-person dining were also inapplicable, in part because they “did not prohibit access to Colectivo’s property they restricted how the property could be used.”
Policyholder attorney Jay A. Urban, of Urban & Taylor s.c. in Milwaukee, said in a statement, “It is unfortunate and disappointing that our Supreme Court took a narrow view of coverage on a unique insurance policy that should have covered the bar and restaurant owners of Wisconsin, and held against not only the business owners but the restaurant association and tavern league who agreed with our interpretation of this Society policy.”
Insurer attorney Heidi L. Vogt, of von Briesen & Roper, s.c. in Milwaukee, said in a statement, “We are gratified that Wisconsin’s highest court correctly applied the terms of the Society policies in this ruling.”
The statement said, “While these times remain undeniably challenging for many of Society’s policyholders, and businesses impacted by the pandemic, this does not alter the terms of Society’s insurance contracts or create insurance coverage for losses that fall outside those contracts’ terms. It is the insurance contracts that control. Today’s well-reasoned ruling should serve as another step toward bringing this litigation to an end.”
State supreme courts in Iowa and Massachusetts have also ruled against policyholders on this issue.