Lawrence General Hospital v. Continental Casualty Company, 90 F.4th 593

Lawrence General Hospital (LGH) operates as a nonprofit hospital and held an “all risk” commercial property insurance policy from Continental Casualty Company that included standard property and business interruption coverage, as well as a specialized Health Care Endorsement for disease contamination.
Amid the COVID-19 pandemic, LGH alleged it suffered physical damage due to SARS-CoV-2's presence on its property and filed claims for covered losses, including business interruption and contamination-related expenses.
LGH also asserted it was subject to state and federal government orders mandating decontamination and compliance with enhanced cleaning protocols to continue certain medical procedures.
The insurer, Continental, denied coverage, arguing that the policy’s physical loss or damage provisions and the Health Care Endorsement did not cover LGH’s COVID-19-related losses.
LGH sued in Massachusetts state court; after removal to federal court, the district court dismissed the complaint for failure to state a claim. LGH appealed.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does COVID-19 cause 'direct physical loss of or damage to property'?	Virus physically altered property via adsorption, requiring remediation.	Virus presence does not constitute physical loss or damage under MA law.	No coverage; court found no tangible property damage required active repair/remediation as per precedent.
Applicability of Disease Contamination Coverage	Government cleaning directives were compulsory decontamination orders.	Orders were not compulsory nor specifically for decontamination.	Orders were mandatory; provision potentially applies. Remanded for further proceedings on this claim.
Meaning of 'order' and 'decontamination' in policy context	Orders were not optional and cleaning amounted to decontamination.	LGH could have chosen not to perform elective procedures; decontamination unattainable for COVID-19.	Orders were compulsory; policy does not require lasting decontamination.
Whether exclusions bar contamination coverage	Coverage should apply given detailed compliance with orders.	Policy exclusions may apply to bar coverage.	District court to consider exclusions; issue not addressed on appeal.

Verveine Corp. v. Strathmore Insurance Co., 184 N.E.3d 1266 (Mass. 2022) (Massachusetts Supreme Judicial Court held that loss or damage required tangible alteration and active remediation; mere presence of COVID-19 did not suffice)
SAS International, Ltd. v. General Star Indemnity Co., 36 F.4th 23 (1st Cir. 2022) (reaffirmed that COVID-19’s presence is not physical damage under MA law)
Legal Sea Foods, LLC v. Strathmore Insurance Co., 36 F.4th 29 (1st Cir. 2022) (similar holding regarding COVID-19-related insurance claims under MA law)