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NY High Court Sides With Other State Courts: COVID-19 Business Interruption Not Enough to State Claim Under Commercial Property Insurance

By Howard B. Epstein and Theodore A. Keyes
July 01, 2024

The COVID-19 pandemic upended the lives of people throughout the world and continues to have lasting impacts four years later. In addition to the significant and sometimes devastating health issues caused by COVID-19, pandemic-related shutdowns gave rise to considerable economic loss. According to Reuters, COVID-19 caused insured losses of $44 billion in the first two years of the pandemic alone, making the COVID-19 pandemic the third largest event of loss ever — surpassed only by Hurricane Katrina and the Sept. 11 attacks.

Many businesses have sought to recover their pandemic losses under commercial property insurance policies, only to be denied coverage. A significant number of policyholders have filed lawsuits challenging these disclaimers, primarily in state courts. But to the dismay of the insureds, a growing majority of high state courts have sided with the insurers in these disputes.

In early 2024, the New York Court of Appeals joined this majority, quashing policyholder hopes that the trend would be reversed. On Feb. 15, 2024, New York's highest state court determined that the presence of SARS-Co-V-2 (the virus that causes COVID-19) at insured properties and the related cessation and interruption of business activities were not sufficient to state a claim for "direct physical loss or damage" under a property insurance policy.

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