In Hartford Fire Co. v. Moda, LLC, 346 Conn. 64, 288 A.3d 206 (Conn. 2023), the Connecticut Supreme Court held in favor of the insurance company against a claim that the insured’s inventory had become outdated and thereby unmarketable while sitting in warehouses waiting for retailers to reopen during the pandemic. The claim did not assert that the inventory itself suffered physical loss or damage within the meaning of the insurance policies. The Connecticut Supreme Court held that the absence of physical damage to the insured’s shoes themselves or the premises itself precluded coverage under the policy’s insuring agreement, obviating the need to decide whether the virus exclusion precluded coverage.
In Cajun Conti, LLC v. Certain Underwriters at Lloyds London, 359 So.3d 922 (La. 3/17/23), the Louisiana Supreme Court reversed a lower appellate court finding for coverage. In this case, the insured restaurant alleged an inability to make full functional use of its facilities due to the presence of the Covid 19 virus on surfaces. The Louisiana Supreme Court found that the lower appellate court had erred in holding that the restaurant was entitled to coverage for its business income losses due to the Covid 19 pandemic. The Court found that the presence of the Covid 19 virus on the surfaces of the insured’s restaurant did not constitute “direct physical damage” within the unambiguous meaning of its commercial property insurance policy’s insuring agreement.
In Best Rest Motel, Inc. v. Sequoia Insurance Co., 88 Cal.App.5th 696, 304 Cal.Rptr.3d 756 (4th Dist. 2023), the California Appellate Court upheld summary judgment for the insurance company despite evidence that the virus physically altered the insured’s premises. The insured owned and operated a hotel in San Diego. Prior to the pandemic, the hotel enjoyed a 94% occupancy rate. After the government issued a shelter-in-place order, the insured experienced a wave of reservation cancellations and a 90% loss of business during March 2020. Due to the suspected presence of the Covid 19 virus, the hotel closed its gym and swimming pool, but remained open otherwise.
The California Appellate Court affirmed the trial court’s summary judgment finding that there was no evidence that the insured could have continued to operate and maintain its income but for the presence of the virus on its property. According to the Court, customers did not cancel their reservations due to the presence of Covid 19 on the insured’s property. To the contrary, testimony from the insured’s hotel manager established that the hotel had rooms ready for occupancy but simply had no takers because people were afraid to travel following the government’s shelter-in-place orders. According to the Court, the problem encountered by the insured was not that they had too few rooms due to the presence of the virus, but rather too few customers due to the government’s shelter-in-place orders.