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First and foremost, we at RLB Law Group hope that you and your families are staying safe and healthy during these trying, unprecedented times.  Yesterday (March 19), Tom Wolf, the Governor of Pennsylvania, ordered all “non-life essential” businesses to close effective 8:00 p.m. EDT last night.  Like many of you, with our office now officially closed, the RLB team is working remotely for the foreseeable future; we, however, are available by email, phone or virtual methods to answer any of your COVID-19 legal questions, particularly in the areas of employment and insurance/reinsurance law.

One of the most frequently-asked questions in recent days has been whether there is insurance coverage available for lost business income due to the government-mandated business closures arising from the COVID-19 outbreak.  In addition to the broad restrictions on businesses in Pennsylvania, New Jersey had ordered the closings of gyms, theaters, amusement parks, indoor malls and casinos earlier this week, as well as imposed a nighttime curfew.  As of last night, New Jersey added to the closure list spas, tattoo parlors, barbershops, nail and hair salons.  According to one infectious disease specialist we consulted with, this extreme phase of containment effort and “social distancing” will, in his estimation, likely last up to 3 months.

Business interruption or business income coverage may be found as an “add-on” to commercial property policies.  Specific business interruption coverage parts or extensions which may be applicable to COVID-19 losses include “civil authority” coverage, which is triggered in part by a governmental entity prohibiting access to a business’s premises, and “contingent business interruption” or “dependent property” coverage, which may provide coverage for business income losses due to interruptions in the supply chain.

There are primarily three issues to consider with respect to business interruption coverages and COVID-19.  The first issue is whether COVID-19 could cause “direct physical loss” or damage to property under the policy.  Typically, that means some type of tangible property damage or physical alteration to the subject property must occur before coverage is triggered.  Under this interpretation, insureds may face an uphill battle proving that COVID-19 caused any direct physical damage.  Note, however, that one New Jersey federal district court found that this language could be interpreted to include property that has been rendered temporarily uninhabitable, or a business incapacitated by, an ammonia release at the property.  See Gregory Packaging, Inc. v. Travelers Prop. Cas. Co. of Am., 2014 WL 6675934 (D.N.J. Nov. 25, 2014) (citing Motorists Mutual Ins. Co. v. Hardinger, 131 Fed. Appx. 823 (3d Cir. 2005) (Third Circuit, applying Pennsylvania law, found that the bacteria contamination of a home's water supply constituted a "direct physical loss" when it rendered the home uninhabitable).  Insureds may use this “loss of functionality” argument in their attempts to trigger coverage, while insurers may argue that COVID-19 (or the threat thereof) is distinguishable from these other causes..

The second issue for consideration is that even if it were found that COVID-19 caused “direct physical loss” to insured property, coverage may be precluded by virtue of a “virus or bacteria” exclusion contained in certain property policies, which provides that losses caused directly or indirectly by virus or bacterium are excluded from coverage. 

Finally, New Jersey has proposed legislation that would override the aforementioned “virus” exclusions contained in property policies, and require insurers to cover COVID-19-related business interruption losses.  There is discussion underway in Pennsylvania to determine whether similar legislation may be enacted there.  We remain in contact with state legislators regarding the status of such potential legislation, or whether Governor Wolf can/will seek to issue an executive order to override the exclusion.  We will continue to monitor these and related issues, and please visit our website,, for further updates.

As always, whether an insurance claim is covered will depend on a careful review of the terms, conditions and exclusions of the policy, the particular set of facts surrounding the loss, and the law of the applicable jurisdiction.  If you would like to discuss any of these topics, or have a particular issue you would like to discuss further, we are available to assist you.

Continued good health,
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