While reading a Wisconsin Supreme Court decision quoted in my post, Are bat infestations and injuries covered under a homeowner’s policy?I noted that the same court held that Covid 19 does not cause property to suffer physical loss or damage.1
The primary reasoning was as follows:
The provisions of the Society’s policy that Colectivo relies on, with the exception of the contamination provision, all require Colectivo to claim a direct physical loss of or damage to either its property or surrounding property. Although society’s policy does not define “direct physical loss of or damage to property”, our previous cases that interpret similar language state that physical loss and physical damage refer to varying degrees of tangible damage. An insured suffers a physical “loss”; of his property when the property is “destroyed” or affected to such an extent that it cannot be repaired. Looks RTE Corp. v. Md. Cas. Co.74 Wis. 2d 614, 624, 247 NW2d 171 (1976). Such a loss occurs, for example, when a building burns down and must be rebuilt. See e.g. Park Terrace, LLC v. Transp. Ins. Co., No. 2010AP2432, unpublished op., ¶4 (Wis. Ct. App. 1 Dec. 2011). Physical “damage” is damage to the tangible property of the insured property that does not rise to a physical damage. Looks Wis. Label Corp. v. Northbrook Prop. & Cas. Ins. Co., 2000 WI 26, ¶¶29–31, 233 Wis. 2d 314, 607 NW2d 276; see also Sandy Point Dental, PC v. Cincinnati Ins. Co., 20 F.4th 327, 332 (7th Cir. 2021). So a roof that is dented with hail but that remains functional has suffered physical damage due to.[t]his dents change [its] physical properties.’ Advance Cable Co., LLC v. Cincinnati Ins. Co., 788 F.3d 743, 747 (7th ed. 2015). However, a product that is only incorrectly labeled has not suffered any physical damage because its tangible properties are unchanged. Looks Wis. Label Corp.233 Wis. 2d 314, ¶¶31–33.
As the vast majority of the other courts that have dealt with the same issue have concluded, the presence of covid-19 does not constitute a physical loss of or damage to property as it does not “alter the appearance, shape, color, structure or other material dimension of the property. ‘ See e.g. Sandy Point Dental PC v. Cincinnati Ins. Co.488 F. Supp. 3d 690, 693–94 (ND Ill. 2020) (collection case), aff’d, 20 F.4th 327 (7th Cir. 2021). The virus does not require structural “repairs or remediation”; it can be removed from a surface with a disinfectant. Looks Uncork & Create LLC v. Cincinnati Ins. Co.498 F. Supp. 3d 878, 883–84 (SDW Va. 2020), aff’d, 27 F.4th 926 (4th Cir. 2022). Similarly, covid-19 does not make property “inherently dangerous” or “uninhabitable” in the same way that “ongoing rockfall” or smoke from forest fires can do, since covid-19 is not a “physical hazard that allows one to simply enter a structure dangerous. ” Looks Biltrite Furniture, Inc. v. Ohio Sec. Ins. Co., no. 20-CV-656-JPS-JPS, 2021 WL 3056191, at * 4 n.4 (ED Wis. 20 July 2021). Rather, the danger of the virus is that “people are close to each other”, not to the property itself. Id.; see also Cork and create498 F. Supp. 3d at 884.
In the case of Palm’s orders, even if they restricted Colectivo’s use of its property, Society’s policy makes it clear that a loss of use differs from physical loss of or damage to property. For example, in a provision on personal property, the insurance expressly covers damages for both loss of or damage to that property as well as loss of use of that property: “We [Society] will pay . . . damages due to direct physical loss or damage, including loss of use, to [invitees’ personal property] caused by accident and arising from any covered cause of loss. ‘ However, the policy provisions that Colectivo relies on omit all languages that are no longer used, but instead only cover a “direct physical loss of or damage to” the property. The provision for corporate income can be thought of as an indirect cover for loss of use, but that does not change the fact that a condition for that provision is still a direct physical loss or damage. “Loss of use” thus differs from a “direct physical loss or injury”, and Colectivo’s argument fails because it confuses the two.
As can be seen from a card I submitted in the Erie Insurance Federal Multidistrict Litigation, I simply do not agree with this reasoning. I think it fundamentally changes what “physical loss” meant under property insurance until Covid 19 occurred. The courts are simply placing their own version of science and what Covid 19 does with property instead of allowing cases to move to the stage where evidence is presented.
Yet the majority of opinions have ruled similarly to the Wisconsin Supreme Court.
Indifference and neglect often do much more harm than outright disapproval.
1 Collectivo Coffee Roasters, Inc. v. Society Ins.No. 2021AP463, 2022 WI 36 (Wis. June 1, 2022).