Two More Courts Rule COVID-19 Did Not Cause Direct Physical Loss
September 15, 2020

Two recent court rulings reaffirm that business interruption (BI) policies are not designed to cover pandemics; A direct physical loss is necessary to be eligible for a BI claim. 

On September 11, a California federal judge, U.S. District Judge Cathy Ann Bencivengo, ruled in the U.S. District Court for the Southern District of California that two barbershops were not eligible for a business interruption insurance payout. U.S. District Judge Bencivengo, in her ruling, cited the growing list of rulings in favor of insurers in similar cases on the issue of BI coverage. 

On September 14, in a similar California suit, another California federal judge ruled that San Francisco retailer Mudpie Inc.’s business losses during the pandemic are not eligible for a BI claim. When dismissing the plaintiff’s claim, U.S. District Judge Jon S. Tigar noted that government stay-at-home orders were not enough to warrant a claim, considering the plaintiff suffered “no permanent loss of its property, so once the orders are lifted, the retailer will get its property back without any need to repair, replace or even disinfect the site.”

These two court decisions lengthen the list of rulings that prove BI policies don’t cover COVID-19 shutdowns. Direct physical loss or damage must occur for a BI claim to be triggered, and government orders do not constitute direct physical loss or damage to property. 

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