Partners Joseph Blyskal and Keith Murphy with support from Associate Kelcie Reid defended a surplus lines insurance carrier from claims by a renowned New Jersey restaurant for business interruption and civil authority insurance coverage under a surplus lines insurance policy in New Jersey state court. The insurer moved to dismiss on the basis that its policy contained a virus exclusion that precluded coverage, and that the policy was not triggered because there were no allegations or evidence of physical damage to the subject restaurant, the Governor’s executive orders permitted restaurants to remain open, and there was no allegation that COVID-19 was present at any location near the subject restaurant. Following full briefing of the issues and on the eve of the issuance of a decision by the court, the plaintiff stipulated to a full dismissal with prejudice.
Relying on Executive Order No. 103 and 107 issued by Governor Murphy, the plaintiff alleged that “[a]s a direct and proximate result of these Orders, the insured premises had become uninhabitable and/or contaminated as a result of a covered cause of loss, resulting in ‘loss of use.’” In response, the Gordon & Rees team argued on behalf of its client that the virus exclusion, which provided that “[w]e will not pay for loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease,” precluded coverage.
Additionally, the firm's team argued that coverage was not triggered because COVID-19, even if present, does not constitute “direct physical loss of or damage” to property as required under the policy, and that there was no allegation that COVID-19 was present at any location within one mile of the subject restaurant as required for the civil authority coverage. In response, the plaintiff contended that it had not received a copy of the policy, that the exclusion was ambiguous, and that New Jersey courts and courts in other jurisdictions do not require physical damage to trigger coverage.
Just four days after the motion appeared for a ruling by the court, the plaintiff stipulated to a complete dismissal with prejudice. Gordon & Rees' continued monitoring of COVID-19 insurance coverage litigation trends across the country allowed them to argue to the court that the overwhelming majority of courts confronting these issues—including New Jersey courts—have sided with insurers, finding that COVID-19 does not trigger the requirement of physical damage and/or that stay-at-home orders are the result of a virus and therefore virus exclusions bar coverage.