Judge Nixes Mars COVID-19 Insurance Bid But Leaves $1M Door Ajar

The U.S. District Court for Eastern Virginia has dismissed a complaint by petcare and food company Mars Inc. seeking insurance coverage for COVID-19-related business interruption claims.

Insurer FM Global sought and won the dismissal of the complaint against the $5 billion in insurance coverage it issued to Mars on the grounds that Mars did not suffer the required direct physical loss and damage from the COVID-19 virus as claimed.

However, while Justice Patricia Tolliver Giles dismissed the full complaint, she left open the door for Mars to refile to collect $1 million under two coverage extensions that even FM Global recognized as possibly providing some coverage.

The FM Global policy contains narrow coverage extensions entitled “Communicable Disease Response” and “Interruption by Communicable Disease”—neither of which requires physical loss or damage.

FM Global told the court that Mars has failed to respond to requests for it to show that it meets the prerequisites or has any evidence to trigger the $1million in coverage available under those provisions.

The judge dismissed the sections of the case regarding these provisions “without prejudice,” meaning Mars can come back to try to recover under them.

The complaint dismissal came despite a late appeal by Mars for the court to consider the Vermont Supreme Court opinion late last month reviving a case in which shipbuilder Huntington Ingalls Industries claimed that the COVID-19 virus “adheres” to surfaces, thereby triggering business interruption coverage. The state Supreme Court remanded the case back to the trial court on the finding that Huntington had met the state’s low hurdle for pleadings and should be heard.

Mars has similarly claimed that statistical modeling confirmed to a “high degree of certainty” that COVID-19 was present in or around its commercial and industrial properties generally and was being “continuously introduced, dispersed, and reintroduced into and altering the air and on surfaces of property” in or around Mars’ locations.

FM Global argued that the Virginia Supreme Court, the Fourth Circuit Court and the majority of other courts have rejected the theory that the coronavirus causes physical loss or damage.