No Direct Physical Loss or Damage / COVID-19
In Invision Development Group LLC v. Continental Casualty Company, the plaintiff, an entity that performs laser hair removals in Newark, DE, sued its insurer, Continental Casualty Company, for COVID-19 related business income losses under a policy that provided coverage for “direct physical loss or damage to property” at the premises. The insurer moved to dismiss the complaint for failure to state a claim and the plaintiff cross-moved to stay the litigation pending a decision from the Third Circuit and other New Jersey courts on similar COVID-19 insurance matters.
On July 12, 2022, the Hon. Noel L. Hillman, U.S.D.J. for the U.S. District Court for the District of New Jersey granted the insurer’s motion to dismiss and denied the plaintiff’s-cross motion to stay. The court held that physical loss or damage to property required actual, tangible damage or loss and, therefore, “closure from a COVID-19 government order does not constitute a physical loss or damage to property to afford insurance coverage.” Because the plaintiff did not allege any change to the structure of its property/premises, the court held that there was no coverage in this case. The court also found that the “period of restoration” language in the plaintiff’s policy further supported a finding that there was no physical loss or damage. The plaintiff’s complaint was thus dismissed with prejudice.
This decision adds to the growing body of case law in the U.S. District Court for the District of New Jersey and the New Jersey Superior Court, Appellate Division, which holds that there is no coverage afforded for COVID-19 related business income losses under first-party property insurance policies that require “direct physical loss or damage to property” as insureds cannot show that their property sustained actual, tangible damage or loss.
The decision can be read here.
The Order granting the motion to dismiss can be read here.