“Direct Physical Loss or Damage”: The Gatekeeper to Property Insurance Coverage and COVID-19

March 30, 2020
Edward M. Koch & Elizabeth C. Dolce - White and Williams LLP

Commentary on insurance coverage for businesses in the wake of coronavirus (COVID-19) has largely, and unsurprisingly, focused on business interruption losses, civil authority provisions, and virus exclusions. However, to get there, policyholders must first get past the gatekeeper to coverage: the “direct physical loss or damage” requirement. The key to coverage for COVID-19-related property claims will be whether the presence or threat of the virus on insured property satisfies this requirement.

While the science, economic impact, and most other aspects of COVID-19 are truly “novel,” insurers and policyholders have been arguing, and courts have been interpreting, the meaning of “direct physical loss or damage” for decades. In the inevitable COVID-19 coverage litigation to come,[1] we expect courts will look to cases analyzing non-structural “invisible” damage (e.g., from toxic gases, bacteria, and odors) to decide whether the presence or threat of the virus at insured property constitutes “direct physical loss or damage.”

Reprinted courtesy of Edward M. Koch, White and Williams LLP and Elizabeth C. Dolce, White and Williams LLP
Mr. Koch may be contacted at koche@whiteandwilliams.com
Ms. Dolce may be contacted at dolcee@whiteandwilliams.com



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