NY high court affirms insurer’s virus suit win
- July 3, 2025
- Posted by: Web workers
- Category: Finance
New York’s highest court Thursday upheld an insurer’s win against a restaurant franchisor’s suit seeking coverage for COVID-19 business interruption losses, finding allegations of physical loss or damage were insufficient.
In a precedential ruling, in Consolidated Restaurant Operations Inc. v. Westport Insurance Corp., the New York Court of Appeals in Albany said that the physical loss trigger coverage in Dallas-based CRO’s all-risk commercial property policy “requires a material alteration or a complete and persistent dispossession of insured property” that the policyholder did not allege.
CRO sought coverage from the Swiss Re Ltd. unit for losses it incurred because of government shutdown orders in March 2020 that impaired the full use of its restaurants. After Westport denied coverage, the franchisor sued in New York state court, arguing that the loss of use of the restaurants as well as the presence of the coronavirus constituted “direct physical loss or damage” under its policy.
Westport successfully moved to dismiss the suit, contending that the loss of use and presence of the virus were not damages covered by the policy. The trial court judge also agreed that any amendments to the complaint would not make CRO’s allegations plausible.
CRO appealed, but the First Department of the New York Supreme Court, Appellate Division upheld the ruling.
The unanimous New York Court of Appeals agreed that CRO did not successfully allege that its properties sustained physical loss or damage and cited similar rulings in state and federal courts nationwide.
“From an insurance perspective in particular, the decision nails it — direct physical loss or damage requires a material alteration of property,” said Aidan McCormack a partner at DLA Piper LLP, who represented Westport.
“Loss of use or installation of plexiglass does not qualify, consistent with first-party insurance law going back decades,” he said.
A representative for CRO did not respond to a request for comment.
