Capacity Limits On Businesses Can Be A ’Direct Physical Loss’, Judge Rules In Bellwether Cases

A federal judge in Chicago has ruled that pandemic-related business closings and capacity limits can qualify as a ‘direct physical loss’ to property that is covered by "business interruption" policies.

U.S. District Judge Edmond Chang of the Northern District of Illinois ruled in three bellwether cases in multidistrict litigation against Society Insurance. Chang rejected a bid to dismiss the cases, Law.com reports.

In a Feb. 22 opinion, Chang said a reasonable jury could find that capacity limits prevent the restaurants and other hospitality businesses from using their physical space, qualifying as a direct physical loss.

The plaintiffs had argued that the presence of the coronavirus on or around their premises had created a dangerous condition, making their premises unfit for their intended use, therefore causing physical damage to the property.

Their Society Insurance policies did not specifically exclude coverage for losses because of a virus or pandemic.