(Article from Insurance Law Alert, January 2023)
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The Maryland Supreme Court ruled that an all-risk property policy did not provide coverage for business losses stemming from the presence of the COVID-19 virus on insured property and the resulting loss of functional use of that property. Tapestry, Inc. v. Factory Mutual Ins. Co., 2022 WL 17685594 (Md. Dec. 15, 2022).
The court answered the following certified question in the negative:
When a first-party, all-risk property insurance policy covers “all risks of physical loss or damage” to insured property from any cause unless excluded, is coverage triggered when a toxic, noxious, or hazardous substance—such as Coronavirus or COVID-19—is physically present in the indoor air of that property; is also present on, adheres to, and can later be dislodged from physical items on the property; and causes a loss, either in whole or in part, of the functional use of the property?
The court explained that absent tangible, concrete and material harm to property, or a deprivation of the possession of property, the physical loss or damage requirement is not met by the presence of viral particles. In so ruling, the court declined to consider the absence of a viral exclusion in the relevant policies, stating: “We do not think the availability on the insurance market of a broader virus exclusion undermines the unambiguous language employed in the Policies.”