560 F.Supp.3d 956
D. Maryland2021 IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
*
Hamilton Jewelry, LLC,
d/b/a/ CF Brandt Jewelers & *
Jewelry Place by the Bay
*
Plaintiff,
* Case No.: 8:20-cv-02248-PWG
v. Judge Paul W. Grimm
*
Twin City Fire Insurance
Company, Inc., *
Defendant. *
* * * * * * * * * * * *
MEMORANDUM OPINION AND ORDER
This insurance coverage case involves a local jeweler’s claim for coverage under a business
owner’s insurance policy for the damages it allegedly sustained as a result of the government- mandated closure of non-essential businesses during the COVID-19 pandemic. Currently pending
before this Court are the parties’ cross-motions for judgment on the pleadings. I have reviewed the
parties’ filings and find a hearing unnecessary. See Loc. R. 105.6 (D. Md. 2021). For the reasons
stated below, Twin City’s motion for judgment on the pleadings is GRANTED, and Hamilton’s
motion for partial judgment on the pleadings is DENIED.
BACKGROUND
On March 23, 2020, Maryland’s Office of the Governor issued an Executive Order
requiring the temporary statewide closure of all non-essential businesses in an effort to control the
spread of COVID-19 and reduce the accompanying threat to public health, welfare, and safety.
ECF 2, Complaint ¶ 27. Plaintiff Hamilton Jewelry, LLC (“Hamilton”), a jewelry store and
showroom located in Upper Marlboro, Maryland, was among the many non-essential businesses
that was required to close its doors during the shutdown period. Id. ¶¶ 7, 30, 31, 35.
Prior to the COVID-19 pandemic and the resulting closure of non-essential businesses,
Hamilton purchased a business owner’s policy from Twin City Fire Insurance Company, Inc.
(“Twin City”) for the policy period commencing May 2, 2019 to May 2, 2020 (the “Policy”). Id.
at ¶¶ 8–9; ECF 40-7, Policy. The Policy provides coverage for “direct physical loss of or physical
damage to Covered Property” that is “caused by or result[s] from a Covered Cause of Loss.” Policy
at 29. “Covered Cause of Loss” is defined as “RISKS OF DIRECT PHYSICAL LOSS unless the
loss is” otherwise excluded or limited by the Policy terms. Id. at 30 (capitalization provided by the
Policy).
The Policy provides additional coverage for business income that is lost as a result of the
necessary suspension of Hamilton’s business operations. The Policy provides, in relevant part:
We will pay for the actual loss of Business Income[1] you sustain due
to the necessary suspension of your "operations" during the "period of
restoration". The suspension must be caused by direct physical loss of
or physical damage to property at the "scheduled premises"[.]
***
With respect to the coverage provided in this Additional Coverage,
suspension means:
(a) The partial slowdown or complete cessation of your business
activities; or
(b) That part or all of the “scheduled premises” is rendered
untentantable [(sic.)] as a result of a Covered Cause of Loss if
coverage for Business Income applies to the policy.
Id. at 38.
1 Business Income means the “Net Income (Net Profit or Loss before income taxes) that
would have been earned or incurred if no direct physical loss or physical damage had occurred”
and “[c]ontinuing normal operating expenses incurred, including payroll.” Policy at 38.
The Policy contains and is modified by an endorsement, captioned “Limited Fungi,
Bacteria or Virus Coverage,” that provides narrow coverage for certain loss or damage caused by
a virus (the “Endorsement”). Id. at 123. As relevant here, the Endorsement provides coverage only
when the damage-causing-virus is the result of a “‘specified cause of loss’ other than fire or
lightning.” Id. at 124. The “specified cause[s] of loss” are particularly enumerated in the Policy
and include “fire, lightning, explosion, windstorm or hail; smoke; aircraft or vehicles; riot or civil
commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic
action; falling objects; weight of snow; ice or sleet; water damage.” Id. at 53. If the damage-causing
virus is the result of a “specified cause of loss,” the Endorsement creates coverage only for “direct
physical loss or direct physical damage to Covered Property”. Id. at 124.
The Endorsement expressly excludes from coverage:
loss or damage caused directly or indirectly by any of the following.
Such loss or damage is excluded regardless of any other cause or event
that contributes concurrently or in any sequence to the loss:
(1) Presence, growth, proliferation, spread or any activity of
“fungi”, wet rot, dry rot, bacteria or virus.
(2) But if “fungi”, wet rot, dry rot, bacteria or virus results in a
“specified cause of loss” to Covered Property, we will pay for
the loss or damage caused by that “specified cause of loss.”
Id. at 123.
In March 2020, after ceasing its business operations, Hamilton notified Twin City that it
would seek coverage under the Policy for the business income allegedly lost during the
government mandated shutdown period. Complaint ¶ 36. Twin City denied Hamilton’s claim on
March 24, 2020. Id. ¶ 37.
On May 20, 2020, Hamilton filed a two-count complaint against Twin City in the Circuit
Court for Prince George’s County, Maryland. See generally Complaint Count I seeks a declaration
that “Maryland’s March 23, 2020 Executive Order . . . prohibited Hamilton [] from operating its
jewelry stores and showrooms” and that Hamilton’s “loss of Business Income is covered under”
the Policy. Id. 9–11. Count II alleges that by declining coverage for Hamilton’s claim for lost
business income, Twin City breached the Policy and denied Hamilton coverage in bad faith. Id.
11–13. Twin City removed the case to this Court, where the parties agreed to submit cross-motions
for judgment on the pleadings under Fed. R. Civ. P. Rule 12(c) solely on the issue of whether the
Policy provides coverage for Hamilton’s claim. ECF 1, Notice of Removal; ECF 31, Joint
Correspondence re: Permission to File Motions.
STANDARD OF REVIEW
The parties have filed cross-motions for judgment on the pleadings under Fed. R. Civ. P.
12(c). Motions for judgment on the pleadings are subject to the same standards used to evaluate
motions to dismiss under Rule 12(b)(6). Drager v. PLIVA USA, Inc., 741 F.3d 470 , 474 (4th Cir.
2014). Accordingly, a court evaluating a motion for judgment on the pleadings must assume that
the well-pleaded facts alleged in the complaint are true and must draw all reasonable factual
inferences in favor of the non-moving party. Rock for Life-UMBC v. Hrabowski, 594 F. Supp. 2d
598, 605 (D. Md. 2009); Pennsylvania Nat'l Mut. Cas. Ins. Co. v. Beach Mart, Inc., 932 F.3d 268 ,
274 (4th Cir. 2019). Courts may also properly consider documents that have been attached to a
12(c) motion provided it “was integral to and explicitly relied on in the complaint” and if the
parties do not challenge its authenticity. Pulte Home Corp. v. Montgomer Cnty., 271 F. Supp. 3d
762, 769–70 (D. Md. 2017). A Rule 12(c) motion should be granted when the pleadings “fail to
state any cognizable claim for relief, and the matter can, therefore, be decided as a matter of law.”
Rock for Life, 594 F. Supp. 2d at 605 (quoting O’Ryan v. Dehler Mfg. Co., 99 F. Supp. 2d 714 ,
717-18 (E.D. Va. 2000)).
DISCUSSION
A. Standard for interpreting the Policy under Maryland law2
Maryland courts apply general principles of contract interpretation when reviewing and
interpreting insurance policies. Agency Ins. Co. v. State Farm Mut. Auto. Ins. Co., 998 A.2d 936 ,
940 (Md. Ct. App. 2010). Accordingly, like other contracts, an insurance policy is to be construed
as a whole to determine the parties’ intentions, and courts “utilize the law of objective
interpretation to ascertain the intent of the contracting parties, provided that intention does not
violate an established principle of law.” Mitchell v. AARP Life Ins. Program, New York Life Ins.
Co., 779 A.2d 1061 , 1069 (Md. Ct. App. 2001).
Maryland courts “look first to the contract language employed by the parties to determine
the scope and limitations of the insurance coverage,” and interpret policy language according to
its “usual, ordinary and accepted meaning unless there is evidence that the parties intended to
employ it in a special or technical sense.” Agency Ins. Co. at 940 (quoting Clendenin Bros., Inc. v.
U.S. Fire Ins. Co., 889 A.2d 387 (2006)). “When the language of a contract is unambiguous, a
court shall give effect to its plain meaning and there is no need for further construction by the
court.” Mitchell, 779 A.2d at 1069 (quoting Wells v. Chevy Chase Bank, 768 A.2d 620 (Md. 2001)).
Maryland courts do not follow the rule applicable in many other jurisdictions that “insurance
policies are to be most strongly construed against the insurer,” but will nevertheless construe an
ambiguous policy term “liberally in favor of the insured and against the insurer as drafter of the
instrument.” Connors v. Gov't Emps. Ins. Co., 113 A.3d 595 , 605 (Md. 2015) (quoting Megonnell
v. United Servs. Auto. Ass’n, 796 A.2d 758 , 772 (Md. 2002)) (emphasis in original). “A policy
2 The parties both rely on Maryland law to support their positions. The Court will do
likewise.
term is considered “ambiguous if, to a reasonably prudent person, the term is susceptible to more
than one meaning.” James McHugh Constr. Co. v. Travelers Prop. Cas. Co. of Am., 223 F. Supp.
3d 462, 467 (D. Md. 2016).
B. The Policy excludes damages caused by a virus
The primary dispute between Hamilton and Twin City is how the Endorsement, which
creates narrow coverage for some damages caused by a virus while broadly excluding others,
applies to Hamilton’s alleged loss of business income during the COVID-19 pandemic. For the
reasons explained below, I find that the Endorsement unambiguously excludes Hamilton’s alleged
damages from coverage under the Policy.
i. The doctrine of reasonable expectations is not applicable in Maryland
Hamilton begins by invoking “the doctrine of reasonable expectations,” and argues that
the application of that doctrine compels a finding that the Endorsement does not preclude coverage
under the Policy. Hamilton states:
The Fourth Circuit has generally explained: “the doctrine of reasonable
expectations is that the objectively reasonable expectations of applicants
and intended beneficiaries regarding the terms of insurance contracts will
be honored even though painstaking study of the policy provisions
would have negated those expectations.” Burlington Ins. Co. v. Shipp,
[215 F.3d 1317 ] (4th Cir. 2000).
ECF 40, Pl.. Mot. (emphasis added) at 9.
The Fourth Circuit decision that Hamilton quotes in the excerpt above is an appeal from
the Northern District of West Virginia applying West Virginia law—it does not support the
application of the “doctrine of reasonable expectations” in Maryland. See Burlington, 215 F.3d
1317.
I would generally assume that Hamilton’s misstatement of the applicable law was simply
an oversight. But that assumption is somewhat challenged when, later in its brief, Hamilton more
affirmatively states that “Maryland adheres to the doctrine of the policyholder’s objectively
reasonable expectations,” this time citing a Fourth Circuit ERISA decision applying North
Carolina law and federal common law, which also do not apply in this Maryland case. Pl. Mot. at
20 (citing Johnson v. Am. United Life Ins. Co., 716 F.3d 813 , 820 (4th Cir. 2013)).
Hamilton’s “reasonable expectations” argument fares no better when it cites Maryland law
in support. First, Hamilton cites Aetna Cas. & Sur. Co. v. Cochran, 651 A.2d 859 , 862 (Md. 1995),
in which the Maryland Court of Appeals addresses an insurer’s duty to defend under the terms of
a general liability policy. The court parenthetically quotes a law review article, which provides
that, to determine the intent of the parties to an insurance contract, “the courts consider the
reasonable expectations of the insured.” Id. Second, Hamilton cites Liberty Mut. Ins. Co. v.
Craddock, 338 A.2d 363 , 375 (Md. Ct. App. 1975), in which the Maryland Court of Special
Appeals, in the process of determining whether certain policy language was ambiguous, noted that
the insured had a “reasonable expectation” that the policy terms allowed him to move from state
to state without extinguishing coverage.
Neither of the decisions Hamilton cites invoke the “doctrine of reasonable expectations,”
and neither stands for the proposition that an insured’s reasonable expectations “will be honored
even though painstaking study of the policy provisions would have negated those expectations.”
Pl. Mot. at 9 (quoting Burlington, 215 F.3d at 1317 ). To the contrary, under Maryland law “the
written language embodying the terms of an agreement will govern the rights and liabilities of the
parties, irrespective of the intent of the parties at the time they entered into the contract.” Maryland
Cas. Co. v. Blackstone Int'l Ltd., 114 A.3d 676 , 681 (Md. 2015).3
3 See Nautilus Ins. Co. v. REMAC Am., Inc., 956 F. Supp. 2d 674 , 685–86 (D. Md. 2013)
(“[The Plaintiff] relies exclusively on citations to West Virginia case law interpreting
In short, Hamilton does not cite, and I have not found, any Maryland case law applying the
doctrine of reasonable expectations.4 Accordingly, my analysis of the Endorsement’s application
begins with its plain language.
ii. The Endorsement is unambiguous
The Endorsement provides, under the heading “Fungi, Bacteria or Virus Exclusions” that
Twin City “will not pay for any loss or damage caused directly or indirectly by . . . [p]resence,
growth, proliferation, spread or any activity of . . . virus.” Policy at 123. It also provides that
“[s]uch loss or damage is excluded regardless of any other cause or event that contributes
concurrently or in any sequence to the loss.” Id.
Maryland law compels this Court to analyze the Endorsement, and the Policy as a whole,
“according to the words and phrases in their ordinary and accepted meanings as defined by what
a reasonably prudent lay-person would understand them to mean.” Universal Underwriters Ins.
Co., 761 A.2d 997 , 1005 (Md. Ct. App. 2000) (quoting Kendall v. Nationwide Ins. Co., 702 A.2d
767 (Md. 1997)).. Courts can look outside the Policy only if its terms are ambiguous, i.e.,
susceptible to more than one meaning from the perspective of a reasonably prudent lay-person. Id.
Twin City argues that the exclusionary language unambiguously excludes coverage for
business income that was lost as a result of the COVID-19 pandemic. ECF 42, Opposition at 9.
Hamilton disagrees, and seems to argue that due to such factors as the title of the Endorsement
(“Limited Fungi, Bacteria or Virus Coverage”), its layout, and the fact that it has a separate $50,000
limit, a reasonably prudent policyholder would understand the Endorsement to cover Hamilton’s
the reasonable expectations doctrine. As discussed above, however, the evidence is clear that
Maryland law governs the interpretation of the Policy.”).
4 Furthermore, under West Virginia law, the doctrine applies only upon a threshold finding
of ambiguity except in “extremely limited” circumstances.” Boggs v. Camden-Clark Mem'l
Hosp. Corp., 693 S.E.2d 53 , 63 (W.V. Ct. App. 2010).
claim.5 Pl. Mot. at 19–21. That is not a reasonable reading of the Endorsement or the Policy as a
whole.
Courts around the country have already had occasion to review insurance policies including
the same or substantially similar exclusionary language in the context of COVID-19 related
business income or business interruption claims. Those courts have almost6 universally concluded
that the applicable virus exclusions unambiguously bar coverage for COVID-19 related claims for
lost income. See, e.g., Franklin EWC, Inc. v. Hartford Fin. Servs. Grp., Inc., 488 F. Supp. 3d 904 ,
907 (N.D. Cal. 2020) (“Sentinel has met its burden of proving that the Virus Exclusion applies to
Plaintiffs’ allegations of coverage.”); N&S Rest. LLC v. Cumberland Mut. Fire Ins. Co., 499 F.
Supp. 3d 74, 80 (D.N.J. 2020) (“Moreover, a survey of the case law on this issue reveals that
federal courts interpreting virtually identical ‘Virus Exclusions’ have nearly unanimously
determined that these exclusions bar coverage of similar claims.”) (collecting cases); Raymond H
Nahmad DDS PA v. Hartford Cas. Ins. Co., 499 F. Supp. 3d 1178 , 1190 (S.D. Fla. 2020)
(collecting cases); Wilson v. Hartford Cas. Co., 492 F. Supp. 3d 417 , 427 (E.D. Pa. 2020).
5 It is not entirely clear in Hamilton’s brief whether it argues that the Endorsement’s alleged
ambiguity creates coverage, or simply that it does not exclude coverage that exists elsewhere in
the Policy.
6 I am aware of two decisions that reach a different conclusion. The Court in Urogynecology
Specialist of Fla. LLC v. Sentinel Ins. Co., Ltd., 489 F. Supp. 3d 1297 , 1302 (M.D. Fla. 2020)
denied the insurer’s motion to dismiss under Rule 12(b)(6) because “several arguably ambiguous
aspects of the Policy make determination of coverage inappropriate at this stage.” A primary
reason for the court’s decision was that a complete copy of the relevant policy was not attached to
the pleadings. Id. Here, the parties have provided the Policy in its entirety and I have reviewed
the Endorsement in that context. The second such decision, Elegant Massage, LLC v. State Farm
Mut. Auto. Ins. Co., 506 F. Supp. 3d 360 (E.D. Va. 2020) has been characterized by other federal
courts as a “notable outlier.” See, e.g., Bluegrass, LLC. v. State Auto. Mut. Ins. Co., No. 2:20-CV- 00414, 2021 WL 42050 , at *4 (S.D.W. Va. Jan. 5, 2021).
Hamilton’s claim falls squarely within the exclusionary terms of the Endorsement, which
unambiguously bars coverage for loss or damage arising out of a virus. Accordingly, consistent
with the findings of the overwhelming majority of courts, I find that the Endorsement bars
coverage for Hamilton’s claim for business income7 lost as a result of COVID-19.
iii. Hamilton’s claim does not fall within the narrow coverage grant in the
Endorsement.
Hamilton asserts next that its claim falls within the Endorsement’s coverage grant for loss
or damage that is caused by a virus, when that virus is, in turn, caused by a “specified cause of
loss.” Pl. Mot. at 24–27; Policy at 124. Here, Hamilton alleges the virus arose out of a “civil
commotion,” namely the “members of the public revolt[ing] against the closures, risking potential
additional infections.” Pl. Mot. at 26. This argument is too clever by half.
“Civil commotion” is not defined in the Policy. Courts have variously defined the term as
“essentially a kind of domestic disturbance . . . such as occur among fellow-citizens or within the
limits of one community. . . . For there to be a civil commotion, the agents causing the disorder
must gather together and cause a disturbance and tumult,” Holiday Inns Inc. v. Aetna Ins. Co., 571
F. Supp. 1460, 1466–67 (S.D.N.Y. 1983), and as an “‘uprising among a mass of people which
occasions a serious and prolonged disturbance and an infraction of civil order, not attaining the
status of war or an armed insurrection. A civil commotion requires the wild or irregular action of
7 Hamilton also claims coverage for “Extra Expense,” an additional coverage under the
Policy, which covers “reasonable and necessary Extra Expense” incurred during the “’period of
restoration’ that you would not have incurred if there had been no direct physical loss or physical
damage” to the insured’s covered property. Pl. Mot. at 13; Policy at 38. “Extra Expense[s]” are
those incurred “to avoid or minimize the suspension of business,” to “continue ‘operations’” and
to repair or replace any property. Policy at 38. Hamilton alleges no facts in support of its claim for
“Extra Expense” coverage. See generally Complaint; Pl. Mot. Furthermore, any existing “Extra
Expenses” would be excluded by the Endorsement.
many persons assembled together.” Hartford Fire Ins. Co., Hartford, Conn., v. War Eagle Coal
Co., 295 F. 663 , 665 (4th Cir. 1924).
Except to assert in conclusory fashion in its complaint that COVID-19 “was and is being
spread as a result of, inter alia, civil commotion in March 2020 and thereafter,” Hamilton has not
pleaded any facts indicating that a civil commotion was the cause of the virus that led to its alleged
loss. Complaint ¶ 28. Instead, Hamilton attaches two news articles as exhibits to its brief that
describe public protests and police response to violations of the Governor’s shutdown order. Pl.
Mot. Exh. O and P. Leaving aside the question of whether the events described in those articles
rise to the level of “civil commotion,” it is not clear as a matter of logic how protests in response
to the Governor’s shutdown order could have resulted in the virus that the shutdown orders were
issued to control. In other words, Hamilton appears to have it backwards—the virus resulted in the
alleged “civil commotion,” not the other way around. And only the former falls under the
Endorsement’s limited coverage grant.
Finally, coverage for loss or damage caused by a virus that arises out of a “civil
commotion” is limited to “direct physical loss or direct physical damage” to covered property.
Policy at 124 (emphasis added). As explained in Section C, below, Hamilton did not suffer direct
physical loss or direct physical damage.
iv. Hamilton’s damages were caused by a virus
Hamilton argues next that the “mandatory closure of its operations . . . [was] solely a result
of the Executive Orders of the Governor,” and that the Endorsement therefore does not apply to
its claim. Pl. Mot. at 22.8 The Endorsement excludes from coverage “loss or damage caused
directly or indirectly” by a virus. Policy at 123 (emphasis added).
As a general matter, Maryland courts apply the “efficient proximate cause rule” to
determine the cause of a loss under an insurance contract. See Hartford Steam Boiler Inspection
& Ins. Co. v. Henry Sonneborn & Co., 54 A. 610 , 612 (1903). But if parties agree to exclude losses
by a particular cause, they may do so through the use of an exclusion that is “conspicuously,
plainly, and clearly set forth in the policy.” Megonnell, 796 A.2d at 772 . “Where the insurer
properly and unambiguously uses language in its exclusion, the clear and specific terms must be
enforced since the insurer cannot be held liable for risks it did not assume.” Id. Exclusionary
language that bars coverage for damages caused even in part by an excluded risk is commonly
referred to as an anti-concurrent causation clause.
The Maryland Court of Appeals has not opined on the application of an anti-concurrent
causation clause in the context of a first-party insurance coverage dispute. In Bao v. Liberty Mutual
Fire Insurance Co., 535 F. Supp. 2d 532 , 540 (D. Md. 2008), however, Judge Fredrick Motz of
this Court reviewed extra-jurisdictional authority and analogous decisions by the Maryland Court
of Appeals and concluded that the Maryland high court “would not apply the efficient proximate
cause rule, but would instead follow the plain language of the concurrent causation clause in the
policy's exclusion.” My colleague Judge Ellen Hollander subsequently observed that Judge Motz’s
reasoning in Bao is “consonant with the Maryland Court of Appeal's clear directive to apply the
8 Hamilton also appears to argue that the Endorsement does not apply because “COVID-19
is actually a disease, not a virus,” and urges this Court to take judicial notice of that fact. Pl. Mot.
at 23–24 (emphasis in original). This argument is difficult to take seriously while we remain in the
throes of a global pandemic caused by SARS-CoV-2, also known as the novel coronavirus.
Furthermore, this argument directly contradicts Hamilton’s repeated assertions elsewhere in its
brief and in its complaint that COVID-19 is a virus. See, e.g., Complaint ¶ 1; Pl. Mot. at 22.
terms of the insurance contract, Bausch & Lomb, 330 Md. at 779 , 625 A.2d at 1031 , and its refusal
to import tort law principles to the interpretation of insurance contracts.” Bethany Boardwalk Grp.
LLC v. Everest Sec. Ins. Co., No. CV ELH-18-3918, 2020 WL 1063060 , at *16 (D. Md. Mar. 5,
2020), reconsideration denied, No. CV ELH-18-3918, 2020 WL 7054760 (D. Md. Dec. 2, 2020).
I agree with my colleagues’ conclusion that anti-concurrent causation clauses, such as that in the
Endorsement, are enforceable under Maryland law.
“Courts that have considered whether the virus exclusion applies where government
closure orders themselves rather than the virus are alleged to be the cause of plaintiff's business
losses, have rejected” arguments like Hamilton’s and concluded that the virus exclusions
nevertheless bar coverage. Raymond H Nahmad DDS PA v. Hartford Cas. Ins. Co., 499 F. Supp.
3d 1178, 1189 (S.D. Fla. 2020) (collecting cases); Diesel Barbershop, LLC v. State Farm Lloyds,
No. 5:20-CV-461-DAE, 2020 WL 4724305 (W.D. Tex. Aug. 13, 2020) (“While the Orders
technically forced the Properties to close to protect public health, the Orders only came about
sequentially as a result of the COVID-19 virus spreading rapidly throughout the community. Thus,
it was the presence of COVID-19 . . . that was the primary root cause of Plaintiffs’ businesses
temporarily closing.”); Seifert v. IMT Ins. Co., 495 F. Supp. 3d 747 , 753 (D. Minn. 2020) (“[the
insured] alleges that his business losses are the direct and proximate result of ‘Governmental
Pandemic Closure Orders; orders that have been put in place in an effort to control the spread of
the COVID-19 Pandemic.’ Pursuant to the anti-concurrent loss provision, if a virus is any part of
the causal chain causing a loss, then the loss is not covered.”).
The same result is compelled here where the Endorsement unambiguously excludes from
coverage virus-related losses “regardless of any other cause or event that contributes concurrently
or in any sequence to the loss,” Policy at 123. The executive orders requiring Hamilton’s temporary
closure were expressly issued in response to the spread of COVID-19 in Maryland. Complaint ¶
27. Hamilton’s claim is therefore excluded by the plain language the Endorsement despite the fact
that the most immediate cause of Hamilton’s closure was the Governor’s March 23, 2020 executive
order.9; 10
C. The Policy only covers physical loss or physical damage to property
In addition to excluding coverage for loss or damage arising out of a virus, coverage under
the Policy is limited to “direct physical loss or physical damage” to covered property. Policy at 29.
Similarly, the Policy’s additional coverage for business income is limited to “the actual loss of
Business Income” sustained “due to a necessary suspension of” business operations that is caused
by “direct physical loss of or direct physical damage to” property on Hamilton’s premises. Id. at
38 (emphasis added). Hamilton argues that its claim for lost business income falls within this
coverage grant because “direct physical loss or physical damage” encompasses the loss of use even
in the absence of physical injury to the property itself. Pl. Mot. at 13–16. I disagree.
This Court has concluded in at least two prior COVID-19 related cases that lost business
income or loss of use of property do not constitute “physical loss” or “physical damage.”
In Cordish v. Affiliated EM Ins. Co., Judge Hollander concluded that “[t]he term ‘physical,’
as used in the Policy, clearly indicates that the damage must affect the good itself, rather than the
Plaintiff's use of that good. . . . Indeed, physical damage is a distinct, demonstrable, physical
9 The parties also dispute whether the government shutdown orders constitute a “covered
cause of loss” under the Policy. Because I conclude that the Endorsement excludes coverage
regardless, I need not reach this question.
10 In its opening brief, Twin City theorizes that Hamilton wrongly bases its theory for
coverage on the Policy’s “Civil Authority” provision, which extends coverage when an insured is
prevented from accessing its covered property by a government authority due to damage to
neighboring property. Opp. at 13–15; Policy at 39. Because Hamilton appears to agree that the
“Civil Authority” provision is inapplicable here, I will not address that argument. ECF 43, Pl.
Reply at 9.
alteration of the property. Direct physical loss occurs when a structure has been rendered
uninhabitable and unusable. Economic loss alone is not sufficient to trigger coverage; physical
alteration to the property is necessary.” No. CV ELH-20-2419, 2021 WL 3883595 , at *14 (D. Md.
Aug. 31, 2021) at *14 (internal quotations and citations omitted) (emphasis added).
Judge Bennett reached the same conclusion in Bel Air Auto Auction, Inc. v. Great N. Ins.
Co., No. CV RDB-20-2892, 2021 WL 1400891 , at *12 (D. Md. Apr. 14, 2021). He summarized:
“Quite simply, this Court is unpersuaded that the COVID-19 virus in some way physically altered
[the insured’s] covered properties or the surrounding areas in a manner that triggers coverage under
the plain language of the Policy. A mere loss of use of property is not ‘physical damage’ within
the meaning of Maryland law.” Id. (emphasis added).
Courts around the country likewise have concluded that policies that cover only physical
loss or physical damage do not provide coverage for business income or business interruption
claims arising out of COVID-19 and/or the resulting government shutdown of non-essential
businesses. The District of Kansas has aptly stated:
[T]he overwhelming majority of cases to consider business income claims
stemming from COVID-19 with similar policy language hold that “direct
physical loss or damage” to property requires some showing of actual or
tangible harm to or intrusion on the property itself.
***
The presence of the words “direct” and “physical” limit the words “loss” and
“damage” and unambiguously require that the loss be directly tied to a material
alteration to the property itself, or an intrusion onto the insured property.63 The
Court follows the majority of courts to consider identical policy language in the
context of COVID-19 and holds that direct physical loss or damage to the
property requires a tangible, actual change to or intrusion on the covered
property.
Promotional Headwear Int'l v. Cincinnati Ins. Co., 504 F. Supp. 3d 1191 , 1201–02 (D. Kan. 2020)
(collecting cases) (emphasis added).
Hamilton principally relies on National Ink & Stitch, LLC, v. State Auto Property &
Casualty Insurance Co., 435 F. Supp. 3d 679 , 680 (D. Md. 2020), for the proposition that “direct
physical loss” or “direct physical damage” encompasses “the loss of use of property that was not
physically destroyed.” Pl. Mot. at 13. But National Ink is distinguishable.
National Ink is not a COVID-19 case. The insured in National Ink case sought coverage
for damage allegedly sustained to its computer system in a ransomware attack, specifically the loss
of data and software and the loss of computer system functionality. Id. at 680–81.
Additionally, National Ink analyzes meaningfully different policy language. The policy in
National Ink covered “physical loss or damage” as opposed to “physical loss or physical damage.”
Id. Perhaps more significantly, the policy in National Ink covered “physical loss of or damage to
Covered Property,” and expressly defined “Covered Property” to include software and stored data.
Id. Accordingly, I do not find National Ink persuasive in this case.
Hamilton also cites two COVID-19 cases where the courts concluded that policies similar
to Hamilton’s did provide coverage for an insured’s loss of business income due to the virus and
the related government shutdowns. In Elegant Massage, LLC v. State Farm Mutual Auto
Insurance, Co., 506 F. Supp. 3d 360 (E.D. Va. 2020), the Eastern District of Virginia concluded
that the array of interpretations of “direct physical loss” under Virginia law rendered the policy
language ambiguous. The court therefore construed the policy in favor of the insured. Id. The
Superior Court for the State of North Carolina reached the same conclusion under North Carolina
law in North State Deli, LLC v. The Cincinnati Insurance Company, Case No. 20 CVS 02569
(N.C. Sup. Ct. Oct. 7, 2020).
The cases Hamilton cites are clear outliers11 that do not meaningfully weigh against the
overwhelming authority12 that supports the conclusion that “direct physical loss or direct physical
damage” requires a showing of “actual or tangible harm to or intrusion on the property itself.”
Promotional Headwear, 504 F. Supp. 3d at 1201–02. And, in any event, they are not binding on
this Court, and I find them to be unpersuasive in light of the far more numerous and better reasoned
decisions that I have referenced above. Because Hamilton has not demonstrated that its covered
property suffered tangible, physical damage, its claims are not covered under the Policy.
D. Twin City did not breach the Policy
For the reasons explained above, I conclude that the Policy does not provide coverage for
Hamilton’s claim for business income that was lost as a result of the COVID-19 pandemic or the
related government closure of non-essential businesses. And because Hamilton’s claims are not
covered, Twin City has not breached the Policy.
11 See Bluegrass, LLC. v. State Auto. Mut. Ins. Co., No. 2:20-CV-00414, 2021 WL 42050 ,
at *4 (S.D.W. Va. Jan. 5, 2021) (describing Elegant Massage as a “notable outlier.”).
12 Twin City cites at least eleven cases in its Opposition that “have found no direct physical
loss in COVID-19 business interruption cases like this one.” Opp. at 18. Since filing its
Opposition, Twin City has submitted seven notices of supplemental authority to this Court, ECF
45–51, citing well over 50 additional cases, the majority of which appear to have reached the same
conclusion.
ORDER
For the foregoing reasons,
1. The Motion for Partial Judgment on the Pleadings by Hamilton Jewelry, LLC,
ECF 38, is DENIED;
2. The Rule 12(c) Motion for Judgment on the Pleadings by Twin City Fire
Insurance Company, ECF 41, is GRANTED.
Dated: September 16, 2021 /S/
Paul W. Grimm
United States District Judge