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The Maryland Supreme Court joined several other state supreme courts Thursday in ruling unanimously that COVID-19 business interruption claims are not entitled to coverage.
New York-based Tapestry Inc., a luxury goods retailer that operates more than 1,400 stores in the U.S. and Internationally, submitted claims to Factory Mutual Insurance Co. under its policies for losses of more than $700 million, according to the ruling by the Maryland Supreme Court in Tapestry Inc. v. Factory Mutual Insurance Co.
Tapestry, which had two all-risk policies with FM that provided a maximum overall limit of liability per occurrence of $1 billion, denied coverage except for communicable disease response and interruption by communicable disease coverages, neither of which is predicated on “physical loss or damage” to property, the ruling said.
The insurer contended that COVID-19 does not cause physical loss or damage and the coverage was barred by contamination exclusion in its policies.
Tapestry filed suit against the insurer in U.S. District Court in Baltimore, which asked the state supreme court to rule on whether there was coverage.
The court agreed with the insurer that the phrase “physical damage” in FM’s policies requires tangible, physical changes to the insured property.
“Tapestry argues that the plain meaning of ‘physical loss or damage’ also embraced, in addition to a loss of possession of property, ‘a functional loss of use of property due to the presence of an external force,’” the ruling said.
“In doing so, however, Tapestry fails to engage with the common meanings of the relevant terms” and instead “merely states its preferred interpretation,” the ruling said.
Attorneys in the case and the insurer did not respond to requests for comment.
State supreme courts in Delaware, Iowa, Massachusetts, Ohio, Oklahoma, South Carolina, Washington and Wisconsin have also ruled in insurers’ favor in comparable cases, with only Vermont’s high court ruling in policyholder’s favor to date.