On January 26, 2021, the U.S. District court for the Northern District of Georgia granted a Motion to Dismiss to The Hartford Financial Services Group, Inc. and Hartford Casualty Company (“Hartford”) in a class action suit filed by a Georgia law firm seeking business income and extra expenses coverage under its “all risk” business owners policy for COVID 19 shutdown losses.

Hartford initially denied the claim as the law firm did not suffer “physical loss” from a “covered cause of loss” as required by the policy.  The law firm argued that the governmental shelter in place order, and the “likely physical presence of COVID-19 on or within the property” were direct physical losses which caused loss of business income.  The Court found that there was not any direct physical loss. The Court stated that a direct physical loss requires an actual change in the insured property causing it to change from a “satisfactory state” to an “unsatisfactory state”. In the case of the law firm at issue, there was not a “physical change” to the property and thus there was not a physical loss. The “likely” presence of COVID 19 was not sufficient in the Court’s eyes because it did not physically alter the insured property.

Further, the Court pointed out that COVID 19 was never actually found on the property and thus even if it could or did cause a physical change in property, it did not do so in this case. Last, the Court pointed out that the law firm’s inability to access the law office was also not a direct physical loss. Thus, no coverage was available for the law firm or the putative class and the matter was dismissed.

You can access the order by clicking HERE.