(Article from Insurance Law Alert, February 2021)
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A New York trial court dismissed a bus company’s COVID-19-related coverage suit, ruling that loss of use or functionality does not constitute “direct physical loss or damage” to property. Visconti Bus Service, LLC v. Utica Nat’l Ins. Grp., 2021 WL 609851 (N.Y. Sup. Ct. Orange Cnty. Feb. 17, 2021).
Visconti sought coverage for loss of business income under an all risk policy. Utica disclaimed coverage, arguing that there was no direct physical loss or damage to property and that coverage was barred by a virus exclusion and an exclusion for “delay, loss of use or loss of market.” Visconti sued for breach of contract, and the court dismissed the complaint.
The court rejected Visconti’s assertion that “loss of use” is sufficient to trigger coverage, noting that such an interpretation is not supported by New York case law. The court stated: “New York courts, state and federal, applying New York law have uniformly held that this policy language is not ambiguous, and that it unambiguously excludes coverage for the mere loss of use or functionality of the covered premises in the absence of actual, demonstrable physical harm thereto.” The court also rejected Visconti’s claim for civil authority coverage, finding that the complaint did not allege “prohibited access” to insured property or damage to property elsewhere. Finally, the court noted that even if “coverage were somehow found to exist, it appears that there are three policy exclusions [virus, loss of use, loss of market] which, singly or collectively, would potentially create an insurmountable barrier to Visconti’s recovery.”
Utica Insurance is represented by Simpson Thacher in this matter.