Business Interruption / COVID-19

J. Kleinhaus & Sons, LLC v. Valley Forge Ins. Co., 2021 WL 5909978, No. 21 CIV 2202 (JPC), (S.D.N.Y. Dec. 14, 2021)

Plaintiff, a diamond dealer, alleged that due to the pandemic and governmental closure orders, it was only able to conduct limited business and suffered income losses.  Following its earlier decision in Michael Cetta, Inc. v. Admiral Indemnity Co., 506 F. Supp. 3d 168 (S.D.N.Y. 2020), the Court concluded that under the policy language, when taken “all together, ‘the plain meaning of the phrase “direct physical loss of or damage to” therefore connotes a negative alteration in the tangible condition of property.'”  Because the plaintiff had alleged only a loss of use, it, therefore, could show no business income or extra expense coverage was owed.

The Court also found that the plaintiff had not adequately alleged that it was owed civil authority coverage because, not only had it not shown that there was a physical loss of or damage to nearby property, but it had similarly not shown that access to its premises was entirely prohibited, nor that the orders were issued due to any supposed damage. The Court also clarified that although the plaintiff pointed to “comments in orders and laws that mention COVID-19 ‘causing property loss and damage'” to contend that COVID-19 does, in fact, cause physical loss of or damage to property, “these conclusory statements are ‘too general and unsupported by specific facts to allege plausibly that [plaintiff’s] property was damaged'” (quoting Food for Thought Caterers Corp. v. Sentinel Ins. Co., Ltd., 524 F. Supp. 3d 242, 249 (S.D.N.Y. 2021).).

Partners Kevin F. Buckley and Jodi S. Tesser and associate Rachel M. Horzempa represented Valley Forge Insurance Co.

The decision can be read here.

This decision was also reported in Law360 on December 16, 2021.

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