311 A.3d 902
D.C.2024Background
- Plaintiffs are ten restaurants and bars in DC and Virginia that closed to in-person dining in spring 2020 due to the COVID-19 pandemic.
- They sought business interruption and civil authority coverage under identical "all-risk" Erie Insurance Exchange Ultrapack Plus Insurance Policies.
- Plaintiffs argued the presence of COVID-19 itself—not just closures due to government orders—constituted "direct physical loss of or damage to" property required for coverage.
- Their claim was denied by Erie, and the Superior Court dismissed their lawsuit for failure to allege facts showing physical loss or damage.
- On appeal, plaintiffs attempted to distinguish their claim from prior case law by alleging actual contamination and physical alteration of property caused by the virus.
- The court reviewed the arguments and affirmed the dismissal, relying on precedent and the specifics of the policy language.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does COVID-19 presence constitute "direct physical loss or damage" under Erie policy? | Virus physically alters air and surfaces—this constitutes physical loss/damage. | Virus does not cause tangible, material alteration of property as required. | No, the virus does not materially alter property; thus, no coverage. |
| Can efforts to clean/replace items to remove virus constitute covered "repair"? | Mitigation and remediation efforts show property was damaged and required repair. | No factual details support actual repairs or alterations; claims are conclusory. | Allegations insufficient to show property damage or required repairs. |
| Is COVID-19 like other covered noxious substance exposures (smoke/gas/asbestos)? | COVID-19 contamination is analogous to noxious substance cases triggering coverage. | Virus is self-remediating, not permanent, and differs materially from noxious substances. | COVID-19 not analogous; it does not create same permanent damage as other substances. |
| Does the policy's Civil Authority clause provide coverage here? | Municipal orders based on virus presence should trigger civil authority coverage. | Provision only triggered by direct physical loss/damage—a peril insured against—which plaintiffs cannot show. | No coverage; trigger not met without physical loss/damage. |
Key Cases Cited
- Rose's 1, LLC v. Erie Insurance Exchange, 290 A.3d 52 (D.C. 2023) (Policy requires tangible, material alteration or change for physical loss or damage)
- George Washington Univ. v. Factory Mut. Ins. Co., 626 F. Supp. 3d 8 (D.D.C. 2022) (Majority of courts have held COVID-19 does not materially alter property)
- Chamberlain v. Amer. Honda Fin. Corp., 931 A.2d 1018 (D.C. 2007) (Pleadings require plausibility, not speculation)
- Chase v. State Farm Fire and Cas. Co., 780 A.2d 1123 (D.C. 2001) (Ambiguous policy terms construed in favor of insured, but courts will not rewrite policies)