District Of Columbia Court Of Appeals Joins Other Courts In Finding No Coverage For COVID-19 Business Interruption Claim

• Law Firm: Crowell & Moring
• Subject Matter: Litigation, Mediation & Arbitration, Coronavirus (COVID-19), Trials & Appeals & Compensation, Insurance Claims, Operational Impacts and Strategy
• Author: Ms Laura Foggan and Adam J. Singer
• Published date: 09 March 2023

On March 2, 2023, the District of Columbia Court of Appeals affirmed the grant of summary judgment to Erie Insurance Exchange in Rose's 1, LLC, et al. v. Erie Ins. Exch., a COVID-19 business interruption claim filed by several restaurants and food service businesses in the District of Columbia. In doing so, the court "join[ed] the majority of other courts in determining that 'direct physical loss of or damage to property' requires some sort of tangible, material alteration, which does not include 'loss of use.'" Opinion at 26.

The restaurants and other businesses argued that the loss of use of their businesses due to the pandemic and governmental shutdown orders entitled them to coverage under their policy's "direct physical loss of or damage" provision, but the court rejected each of their arguments. The court first noted that "most courts have concluded that there is 'no coverage for loss of use based on intangible and incorporeal harm to the property due to COVID-19 and the closure orders that were issued by state and local authorities even though the property was rendered temporarily unsuitable for its intended use.'" Id. at 13 (citing SA Palm Beach, LLC v. Certain Underwriters at Lloyd's London, 32 F.4th 1347, 1358 (11th Cir. 2022)). It then joined this clear majority based on a plain reading of the policy language. Specifically, the court found that the phrase "direct physical loss of or damage" "requires a tangible, material alteration or change to covered property." Id. at 16. It reached this conclusion following a simple examination of the dictionary definitions of the words "direct" and "physical." Those definitions led the court to conclude that "loss of covered property must be tangible and material" when "[t]aking the Policy at face value." Id. at 19. It further found that other provisions in the policy supported its interpretation, given that "[t]hroughout the Policy, the...