Insurers argue that business closures due to COVID-19 are not covered by business interruption insurance because COVID-19 does not cause physical injury to tangible property. This is plainly incorrect.
A building does not have to have been burned to the ground or structurally damaged to have suffered physical injury. There is abundant precedent for treating the presence of a harmful substance as property damage. Insurers regularly pay claims on this basis in a variety of contexts.
For example, asbestos and ammonia fumes in buildings have been treated as property damage, although they don’t damage the buildings’ structure. Contaminants in groundwater and surface water are treated as property damage although the water remains wet and continues to flow, and you would not know by looking at it that it is damaged. The buildings, groundwater, and surface water are damaged because the physical presence of a dangerous substance in them poses a threat to human health.
This applies to COVID-19 as well. The insurance industry, fearful of the magnitude of COVID-19 business interruption claims, acts as if COVID-19 were something new and unprecedented. It is not. Insurers must meet their obligations and pay these claims.
My colleagues Mark Packman and Jason Rubinstein have written an excellent article discussing COVID-19 business-interruption cases that have addressed the physical-injury-to-tangible-property issue. I highly recommend it to anyone whose business has been impacted by the COVID-19 pandemic.