A federal district court in Virginia has refused to dismiss a COVID-19 related business interruption dispute filed by a spa against a State Farm Mutual Insurance Co. unit despite its political virus exclusion.
U.S. District Court in Alexandria, Virginia, argued that the virus exclusion did not apply because COVID-19 was not present on the plaintiff's property and was not the basis for the loss of income, according to the decision of December 9 in Elegant Massage, LC d / b / a Light Stream Spa v. State Farm Mutual Automobile Insurance co. and State Farm Fire and Casualty Co.
Elegant Massage, which operates the Stream Spa in Virginia Beach, Virginia, had received a risky commercial property policy from State Farm as of July 22, 2020, according to the judgment
Elegant voluntarily closed the spa on March 1
State Farm denied the allegation of business interruption because the spa had been closed voluntarily, there was no civil order to close the business, there was no known damage to the business or property as a result of COVID-19 and the loss of income coverage precludes coverage for loss caused by the virus, according to the ruling.
The spa filed a lawsuit in May, alleging breach of contract and later alleging bad faith.
The ruling said that virus exclusion is specifically about the virus' growth and spread. In addition, it does not provide coverage for the virus' cure or removal. "This supports that the virus exclusion applies where a virus has spread throughout the property," the decision said.
"Here the plaintiff does not claim that there is a virus on the covered property or that a virus is the direct cause of the property's physical loss," the decision states, when the exclusion is not held applicable to the claim.
The court also refused to dismiss the case on the grounds that the spa had not suffered any direct physical loss. Although the spa was not structurally damaged, it is likely that the plaintiff "experienced a direct physical loss when the property was considered uninhabitable, inaccessible and dangerous to use by the executives due to its high risk of spreading COVID-19," he said.
The court refused to reject the spa's disbelief. "Although coverage is a precondition for a claim of infidelity, the court has found that the plaintiff has relied on sufficient facts which, if proved, would fall within the scope of the policy," the decision said, in order for the lawsuit to continue.
State Farm said in a statement, “We respectfully disagree with the decision and will consider all our options as we continue with this dispute. State Farm is convinced that we have fulfilled the terms of our customer's contract. We do not collect premiums to protect against virus losses.
Spa's lawyers did not respond to a request for comment.
More insurance and risk management news about the coronavirus crisis here .