DALLAS FEDERAL COURT DISMISSES COVID-19 BUSINESS CLOSURE CASE DUE TO LACK OF DIRECT PHYSICAL LOSS

A federal district judge in Dallas recently dismissed another lawsuit by a business forced to close as a result of COVID-19 shutdown orders in the spring of 2020.  Berkseth-Rojas v. Aspen Am. Ins. Co., 3:20-CV-0948-D, 2021 WL 101479 (N.D. Tex. Jan. 12, 2021) (slip op.) involved a dentist’s office which was forced to shut down all non-essential procedures in 2020.  While many insureds took a “fomite” approach, alleging the presence of disease-causing particles in or on their premises, this insured took a different approach, alleging her property suffered a direct physical loss because it became dangerous to human health, and the property could not be used in the same way that it previously had been used. 

The court distinguished between a condition that might actually contaminate the property, such as smoke or asbestos, and the mere inability to use the premises to provide services to customers.  The court further noted that the dentist had not alleged the actual presence of virus particles damaged the premises, but merely that she had to shut down to prevent the spread of the virus. The court concluded the loss being alleged was not to the insured property, but solely to the dentist’s business, which was insufficient to trigger the policy’s business income and extra expense coverage.