On Wednesday, a federal judge in New York denied FM’s Rule 12(c) motion for judgment on the pleadings after finding the Contamination Exclusion in the Factory Mutual policy to be ambiguous as to whether it bars coverage for business interruption losses resulting from communicable disease. The case is Thor Equities, LLC v. Factory Mutual Ins. Co., No. 20 Civ. 3380 (AT) (SDNY). This is a critical decision under the Factory Mutual policy form, which is substantively the same as policies issued by Factory Mutual’s sister company, Affiliated FM Insurance Company. Factory Mutual and Affiliated FM have maintained that the contamination coverages are “exceptions” to this exclusion, with the exclusion precluding coverage for communicable disease loss under other policy coverages. But the ruling validates what policyholders have been arguing – that communicable disease “loss” is covered throughout the Factory Mutual policy, in addition to under the sublimited communicable disease emergency response coverages.
Factory Mutual’s “Contamination” Exclusion Is Ambiguous; May Not Limit Coverage For COVID-19 Business Interruption Loss
April 26, 2021
Michael S. Levine - Hunton Andrews Kurth