The federal district court in Michigan dismissed the insured chiropractor's loss of business income claim. Turek Enters. v. State Farm Mut. Auto, Ins. Co., 2020 U.S. Dist. LEXIS 161198 (E.D. Mich. Sept. 3, 2020).
Plaintiff was forced to close its business from March 24 to May 22, 2020, due to the Governor's shut-down order. Plaintiff filed a claim with State Farm, but it was denied because the insured property had not sustained accidental direct physical loss. Further, the policy included a virus exclusion.
Plaintiff sued and State Farm moved to dismiss. State Farm argued that Plaintiff's business interruption losses were not caused by a Covered Cause of Loss. The losses were not the result of an "accidental direct physical loss to Covered Property."
The court focused on "direct physical loss." Plaintiff argued that "physical loss to Covered Property" included the inability to use Covered Property. This interpretation was consistent with the definition of "loss," but ultimately rendered the worst "to" meaningless. "To" was used as a preposition indicating contact between two nouns, "direct physical loss" and "Covered Property." Accordingly, the plain meaning of "direct physical loss" required that there be a loss to Covered property; and not just any loss, a direct physical loss. Plaintiff's interpretation would be plausible if, instead, the term at issue were "accidental direct physical loss of Covered Property."
State Farm's interpretation was also consistent with the recent COVID-19- related cases interpreting similar or identical terms, including Diesel Barbershop, LLC v. State Farm Lloyds [post here]. Because Plaintiff failed to state a "direct physical loss to Covered Property," the complaint did not allege a covered Cause of Loss.
Further, the virus exclusion barred coverage. Plaintiff argued that the order, not the virus, caused the loss. But the order itself, and by extension Plaintiff's business interruption losses, would not have occurred but for COVID-19. Further, the policy's anti-concurrent causation clause extended the virus exclusion to all losses where a virus was part of the causal chain. Thus, even if the order were a more proximate cause than COIVD-19, coverage would still be excluded.
