Earlier this month, a Texas federal court sided with an insurance company’s motion to dismiss a lawsuit by a policyholder, finding that there was no coverage for plaintiffs’ claims for business interruption (BI) COVID-19 losses.

As outlined in a National Law Review article yesterday, in his decision, Senior U.S. District Judge David Ezra agreed with what insurance companies have been showing for months: COVID-19 does not cause direct physical damage to property.

The court held that plaintiffs failed to prove they had incurred a direct physical loss, that the virus exclusion included in the policy barred policyholders’ claims, and that the Civil Authority provision in the policy was not triggered. 

The judge made a couple of very important points in his decision: 

• While there is “no doubt that the COVID-19 crisis severely affected plaintiffs’ businesses, [the insurer] cannot be held liable to pay BI insurance on these claims as there was no direct physical loss.” He added that even if there were direct physical loss, the virus exclusion would apply to bar plaintiffs’ claims.
  

• The judge also stated that “given the plain language of the insurance contract between the parties, the Court cannot deviate from this finding without in effect re-writing the policies in question.”

The Texas Court joined a chorus of states recently siding with insurers on the grounds of similar findings, including Florida, Michigan, and the District of Columbia. 

For more information, please visit fairinsure.org.