Conn. Supreme Court Upholds Insurers in COVID Business Loss Appeals

The Connecticut Supreme Court has upheld insurers in two cases where claims for business interruption losses blamed on Covid-19 were denied because there was no direct physical damage.

One case involved healthcare facilities Connecticut Dermatology Group, Live Every Day, and Ear Specialty Group, while the second was brought by Greenwich-based footwear company Moda and its subsidiaries that include Fisher Footwear.

The fashion shoe maker claimed that it lost $100 million in business income after retailers cancelled orders because of mandatory store closures. But Waterbury Judicial District Judge Barbara N. Bellis ruled that government orders restricting access to retail locations did not constitute a direct physical loss of property and granted summary judgment in favor of The Hartford, which issued a package insurance policy to the company.

In both cases the plaintiffs filed claims with Twin City Fire Insurance Co., Sentinel Insurance Co., Hartford Fire Insurance Co., and the Hartford Financial Services Group under policies containing provisions requiring the insurance companies to “pay for direct physical loss of or physical damage to” covered property caused by a covered cause of loss. The policies at issue were commercial package policies and, in the case of Moda/Fisher, also a marine policy.

In both cases, the state’s high court agreed with lower courts that granted summary judgment for insurers and finding that the claimed business interruption losses are not covered by the policies.

“We affirm the trial court’s judgment on the alternative ground that there is no genuine issue of material fact as to whether the policies did not cover the plaintiffs’ claims because the plaintiffs did not suffer any direct physical loss of covered property,” the high court wrote.