Today, the Wisconsin Supreme Court issued its unanimous decision in Colectivo Coffee Roasters, Inc. v. Society Insurance, a Covid-related insurance coverage case. Ruling for the insurer, the Court concluded that (1) pandemic-related inability to offer in-person dining did not constitute property damage or direct physical loss; and (2) the suspension of operations due to the presence of Covid-19 did not entitle bar or restaurant proprietors to coverage under the contamination provision of the insurance policy at issue. See No. 2021AP463, 2022 WI 36, (June 1, 2022).
As to the first point, the Court explained that "physical losses and physical damages refer to different degrees of tangible harm": physical loss occurs when property is "destroyed" or otherwise so impacted that "it cannot be repaired"; while physical damage occurs when "the tangible characteristics of the insured property" are changed, yet "does not rise to the level of a physical loss." Accordingly, the Court rejected Colectivo's contentions that it had suffered physical loss or physical damage due to the public health orders closing restaurants or the "presence of COVID-19 particles."
As to the second point, the policy's contamination provision offered coverage where contamination "results in an action by a public health or governmental authority that prohibits access to the [property] or production of [the insured's] product." In relevant part, the policy defined "contamination" as a "dangerous condition in [the insured's] products, merchandise or premises." Accordingly, the Court explained that the contamination provision did not apply because (1) restaurant operations were suspended due to the public health orders, not the presence of COVID-19 and (2) those public health orders did not prevent access to the property or production, rather they only restricted the use of the property and prohibited in-person dining.
In issuing this decision, the Supreme Court of Wisconsin joins the Second, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuits as well as the Iowa Supreme Court and Massachusetts Supreme Judicial Court, which have denied insurance coverage for Covid-related claims. See Key COVID-19 Insurance Coverage Cases Tracker (US): 2022, Practical Law (last updated Apr. 26, 2022). Of course, this is likely not the end of Covid-related insurance litigation in the United States, but the clear trend favors insurers. As Justice Dallet noted in today's decision: "the overwhelming majority of other courts . . . have concluded [that] the presence of COVID-19 does not constitute a physical loss of or damage to property."
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