626 F.Supp.3d 8
D.D.C.2022Background
- George Washington University (GWU) purchased an "All Risks of Physical Loss or Damage" property policy from Factory Mutual covering July 1, 2019–July 1, 2020, with Time Element and Additional Coverages.
- The policy’s Communicable Disease additional coverage pays up to $1 million for cleanup and reputation management for locations with the actual (not suspected) presence of a communicable disease; Factory Mutual paid GWU $1 million.
- GWU alleges COVID-19 was present on campus, forced operational shutdowns, and caused millions in remediation and lost-revenue damages; GWU sought additional coverage under the policy.
- Factory Mutual denied coverage, arguing COVID-19 did not cause "physical loss or damage" to property; it moved to dismiss under Rule 12(b)(6).
- The district court construed the policy under D.C. law, held "physical loss or damage" unambiguously requires a tangible alteration to property, found COVID-19 does not cause such lasting physical alteration, and granted the insurer’s motion to dismiss.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether "physical loss or damage" requires a tangible alteration to insured property | "Loss" means loss of use/functionality; the presence/risk of virus suffices | The plain meaning of "physical" requires a tangible, material change to property | Court: phrase is unambiguous; tangible alteration required |
| Whether SARS-CoV-2’s presence or droplets materially alter property (thus triggering coverage) | Viral deposition and altered surface/air chemistry constitute physical damage | Viral presence is transient and can be cleaned; it does not impair the property itself | Court: COVID-19 does not materially or permanently alter property; no coverage |
| Whether GWU can recover under Time Element/Civil Authority or on imminent-risk theory absent physical alteration | Imminent risk or loss of use supports coverage; Civil Authority orders caused insured losses | Time Element/Civil Authority require physical damage of the insured type; without it, no trigger | Court: same tangible-alteration requirement bars these claims; dismissal granted |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading standard: plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (complaint must allege nonconclusory factual matter)
- Santo’s Italian Cafe LLC v. Acuity Ins. Co., 15 F.4th 398 (loss of use is not the same as physical loss)
- Sandy Point Dental, P.C. v. Cincinnati Ins. Co., 20 F.4th 327 (physical alteration, not mere contamination risk, is required)
- Town Kitchen LLC v. Certain Underwriters at Lloyd’s, London, 522 F. Supp. 3d 1216 (physical change to material/tangible structure required)
- 100 Orchard St., LLC v. Travelers Indem. Ins. Co. of Am., 542 F. Supp. 3d 227 (presence of COVID-19 renders property harmful to people but not damaged)
- Woolworth LLC v. Cincinnati Ins. Co., 535 F. Supp. 3d 1149 (virus can be cleaned; no physical damage requiring repair/replacement)
- Crescent Plaza Hotel Owner L.P. v. Zurich Am. Ins. Co., 520 F. Supp. 3d 1066 (majority of courts find no coverage for COVID-19 under similar language)
- Karmel Davis & Assocs., Att’ys-at-Law, LLC v. Hartford Fin. Servs. Grp., Inc., 515 F. Supp. 3d 1351 (mere viral presence is not direct physical change)