Physical Loss or Damage: Court Decisions On Contamination And All Risk Property Coverage

In the debate over coverage for coronavirus business income losses, many insurers have asserted that the virus causes “no physical loss or damage” as their reason for denying claims.

The argument is reminiscent of past coverage battles over just what constitutes “physical loss or damage” in the insurance realm.

Indeed, until COVID-19 appeared, many of the recent battles over the issue of what constitutes “physical damage” for insurance purposes centered on technology losses—namely, losses of data, loss of computer system stability and damage to computer files.

Others concerned various infusions or contaminations that rendered food or equipment or premises unusable.

The lesson learned from many of these court battles is that the insurance industry’s restrictive interpretation of the phrase “physical loss or damage” may be legally untenable.