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Holding
The New York Court of Appeals ruled that allegations of the COVID-19 virus at insured property locations and the resulting business closures and accommodations resulting from the virus do not state a claim for “direct physical loss or damage” under a property policy. Consolidated Rest. Operations, Inc. v. Westport Ins. Corp., 2024 N.Y. LEXIS 66 (N.Y. Feb. 15, 2024).
Background
Consolidated Restaurant Operations, an owner and operator of restaurants, sought coverage from Westport Insurance Corporation under an all-risk commercial property policy for business losses incurred during the COVID-19 pandemic. When Westport denied coverage, Consolidated sued, seeking a declaration of coverage and alleging breach of contract. A New York trial court granted Westport’s motion to dismiss, finding that Consolidated could not establish “direct physical loss or damage” to its property, as required by the policy. An intermediate appellate court affirmed, ruling that “direct physical loss or damage” requires a showing of “actual, demonstrable physical harm” and that the pleadings failed to allege such harm. In particular, the appellate court noted that Consolidated did not identify any physical change or transformation of insured property. The New York Court of Appeals affirmed.
