The Plaintiff is the operator of a hair salon that was insured by a business owner’s insurance policy issued by the Defendant. She claimed that her business was impacted by the spread of the COVID-19 pandemic and by the government’s response, which impaired her ability to operate her salon. She sought coverage for her losses from the Defendant. After her claim was originally denied, she filed an action on behalf of herself and a putative class of other salon owners in the U.S. District Court, District of Massachusetts (Springfield Division).  On behalf of the Defendant, Morrison Mahoney filed a motion to dismiss arguing that the relevant insurance policy provisions explicitly bar coverage for the alleged losses and that the Plaintiff failed to state a claim upon which relief could be granted.

The relevant insurance policy issued to the Plaintiff provided business income loss, extra expense, and civil authority coverage. Each of these provisions is a standardized form drafted by the Insurance Services Office. Insurance coverage applies only where there is a direct physical loss of or damage to property either at the insured’s business premises or at another property if, in response, to a civil authority issues an order that prevents access to the insured’s business. The insurance policy also included a so-called “virus exclusion” endorsement.  The endorsement states that the Defendant will not pay for loss or damage caused directly or indirectly by any virus, bacterium or other microorganism that induces or can induce physical distress, illness or disease. The Defendant asserted that the insurance policy did not provide coverage for the losses asserted by Plaintiff.  Furthermore, even if the loss fell within the insuring agreement, the virus exclusion endorsement applies because the losses were indirectly caused by the COVID-19 virus. The Plaintiff argued that the insurance policy language was ambiguous and that there were factual questions at issue to defeat the Defendant’s Motion to Dismiss.  U.S. District Court Judge Mark Mastroianni was not persuaded by the Plaintiff’s argument and granted the Defendant’s Motion to Dismiss in its entirety. 

In Massachusetts, the interpretation of an insurance contract is a question of law. Other courts, including courts in this district, have previously considered whether identical insurance policy language provided coverage for losses related to the COVID-19 pandemic. The insurance policy language clearly requires physical loss or damage and the Plaintiff did not plausibly alleged either that the COVID-19 virus was present inside her salon or that its presence in the larger social context caused any physical loss or damage. In the absence of ambiguity, the Plaintiff’s expectations cannot expand coverage beyond the scope established by the terms of the insurance policy issued by the Defendant. The government’s limitations, nor the Plaintiffs losses resulted from physical damage to the Plaintiff’s business caused by the COVID-19 virus. There is no question that the government order restricting the Plaintiff’s operation of her business were issued in response to the spread of the COVID-19 virus, thus any losses flowing from those orders were indirectly caused by the COVID-19 virus. Therefore, dismissal of the case was appropriate.