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Business interruption policy doesn’t apply to COVID claim

Where a hospital failed to allege that the presence of SARS-CoV-2 droplets in the air and on surfaces in its facilities constituted physical alteration to its property, it wasn’t entitled to coverage under a business interruption policy.


This matter is before the court on the motion to reconsider filed by plaintiff Carilion Clinic in its insurance coverage suit against American Guarantee & Liability Insurance Company. More than six months after the court’s Feb. 4, 2022, ruling on the motion to dismiss, Carilion Clinic asks the court to address certain arguments it suggests the court did not address in its earlier 40-page memorandum opinion. In that ruling, the court granted AGLIC’s motion to dismiss Carilion Clinic’s claim for insurance coverage under the property damage and time element provisions of the insurance policy, but denied AGLIC’s motion to dismiss as to the interruption by communicable disease coverage.


In asking the court to reconsider its prior ruling, Carilion Clinic selectively mentions the few cases in which motions to dismiss on COVID-19 coverage have been denied, and completely ignores the mountain of precedent from around the country denying coverage under similar policies. By and large, Carilion Clinic’s motion to reconsider sidesteps the uniform decisions of United States Courts of Appeals, including the published decision of the Fourth Circuit in Uncork and Create, LLC v. Cincinnati Insurance Co., 27 F.4th 926 (4th Cir. 2022), denying property damage coverage for the COVID-19 pandemic.

Instead, the motion to reconsider asks the court to reverse course based on the very few decisions that have favored the insured, without regard to salient differences in the policies involved in those cases. Carilion Clinic’s argument is not supported by the text of the Zurich EDGE Policy nor the vast majority of cases that have decided these issues.

Carilion Clinic next argues that the court did not address its argument that mere slowdown of business operations is covered by the Zurich EDGE Policy’s business interruption provision. Regardless of whether it suffered a shutdown or slowdown of its business activities due to the COVID-19 pandemic, Carilion Clinic must still plausibly allege that the presence of SARS-CoV-2 droplets in the air and on surfaces in its facilities constitutes physical alteration to its property, which it is simply unable to do.

Sweeping aside the overwhelming number of cases finding no coverage for COVID-19 business losses, Carilion Clinic seeks reconsideration by claiming that its allegations of physical loss or damage are more “robust.” Carilion Clinic cites scientific studies in amicus briefs filed in the Court of Appeals of Maryland and the New Hampshire Supreme Court, but these studies undermine the premise of its argument.

As these amicus briefs make clear, SARS-CoV-2 does not cause direct physical loss of or damage to property, rather it harms people who breathe indoor air into which an infected person has exhaled SARS-CoV-2 droplets and infectious aerosols. The Zurich EDGE Policy providing business interruption coverage resulting from “direct physical loss of or damage caused by a Covered Cause of Loss to Covered Property,” simply cannot be read to extend to cover such personal harm.

Carilion Clinic next argues that the court did not address three aspects of its claim that the contamination exclusion does not preclude coverage for its COVID-19 losses. Each of these arguments suggests that the contamination exclusion is at odds with the special coverage for interruption by communicable disease. The court disagrees.

Plaintiff’s motion to reconsider denied.

Carilion Clinic v. American Guarantee & Liability Insurance Co., Case No. 7:21-cv-00168, Nov. 16, 2022. WDVA at Roanoke (Urbanski). VLW 022-3-513. 20 pp.