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Yet Another Business Denied Coverage for Losses Related to Covid-19

February 4, 2022

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<p style="text-align: justify;">In <em><a href="">Big Red</a> Management Corporation v. Zurich American Insurance Company</em>, the Court granted insurance company Zurich’s motion to dismiss, concluding yet again that many insurance policies do not cover losses associated with Covid-19 and mandated closures.</p>
<p style="text-align: justify;">Big Red Management Corporation (“Big Red”) manages roughly a dozen restaurants in the Philadelphia region. All Big Red’s restaurants were insured by Zurich under a “all-risk” policy, which is a policy that covers any loss caused by an event that is not specifically excluded from coverage. Big Red’s policy contained several relevant exclusions, including a “microorganism” exclusion and a “civil authority” exclusion. The “microorganism” exclusion disclaimed coverage for losses caused directly or indirectly by any activity of microorganisms. The “civil authority” exclusion disclaimed coverage for losses caused by governmental suspension of operations unless the governmental suspension was in response to physical loss or damage to property within a one-mile radius. This exclusion appears to relate to government orders made in response to natural disasters which cause extensive property damage.</p>
<p style="text-align: justify;">Big Red argued that its restaurants suffered economic losses as a result of Covid-19 and the related “shut-downs”, and that its losses were covered by Zurich’s “all-risk” policy. Zurich disagreed, citing the relevant exclusions. The Court agreed with Zurich, as would be expected based on similar cases recently decided in Pennsylvania courts. The Eastern District, along with other Pennsylvania courts, have made it clear that where a policy provides coverage for economic losses caused by physical damage to property or an inability to access the property, that provision largely does not apply to economic losses resulting from Covid-19 and related “shut-downs.</p>
<p style="text-align: justify;">Thanks to Brian Zappala for his contribution to this post. Please contact <a href="">Heather Aquino</a> with any questions.</p>

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