As we see restaurants, bars, hair salons, and other consumer-facing businesses forced to close down due to Covid-19 related losses, the old adage “needing insurance is like needing a parachute; if it isn’t there the first time, chances are you won’t be needing it again” seems more applicable now more than ever.  However, surprising nobody, in response to the Covid-19 crises, insurers have been united in arguing that commercial property insurance policies do not cover Covid-19 pandemic related losses. 


Insurers have taken an early stand on the threshold issue of whether the actual or threatened presence of Covid-19 or the spread of Covid-19, and the attendant government orders to attempt to slow the spread of Covid-19, can trigger insurance coverage for business interruption, business income loss, extra expenses and business closures.  Insurers have successfully argued that Covid-19’s spread and/or the Covid-19 presence does not constitute “physical loss of or damage to property,” the event typically required for commercial property insurance policies to accept a tender for coverage.  This has led to hundreds of insurance coverage lawsuits, including many class actions and potential consolidation of cases of the federal lawsuits in multi-district litigation.  


Recently a Missouri federal court rejected these arguments made by an insurer in a case titled Studio 417, Inc. v. The Cincinnati Insurance Co.  The Missouri Court held that a business interruption insurance policy covered a shutdown of a group of hairdresser salons and restaurants because of Covid-19.  The policy covered only “direct physical loss,” but the court held that the presence of COVID-19 satisfied the plain meaning of “direct physical loss,” since the plaintiffs alleged that the virus was a “physical substance” that “attached to and deprived Plaintiffs of their property, making it unsafe and unusable.”  The insurer of course took the same position as nearly all insurance companies—that there must be tangible or structural damage to property, such as storm or fire damage, to satisfy the physical loss or damage requirement in nearly all business interruption policies.


The fact that the premises were not physically altered by the spread of Covid-19 and/or the presence coronavirus was not fatal to the plaintiffs’ claim; the court found that “even absent a physical alteration, a physical loss may occur when the property is uninhabitable or unusable for its intended purpose.”

The insured plaintiffs also prevailed on their claim under a provision of the policy that provided coverage when a “civil authority” “prohibited access” to the premises. The court found that the fact that the restaurants were permitted to remain open for food preparation and take-out sales did not bar their claim; the court found that banning indoor dining at the restaurants could constitute a prohibition of access “to such a degree as to trigger the civil authority coverage.”

It remains to be seen if other courts will adopt this position and, if so, what facts sufficiently establish direct physical loss. But, at least under this ruling, showing that the virus has a physical presence and that it caused deprivation at the property would be sufficient to invoke coverage. This is a win for retailers looking for any means to recover COVID-19 losses.

David W. Wolfe  is an associate attorney with Porter Simon licensed in California and Nevada, with offices in Truckee and Tahoe City, California, and Reno, Nevada. He can be reached at or

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