Covid-19 Causes No Property Damage & is Excluded


Clear & Unambiguous Exclusion Defeats Loss of Business Income

There was a time when litigation over insurance issues had no political consequences. like so many other things, the Covid-19 pandemic has upended that norm. Now local governments have at times issued orders closing spas and other businesses, allegedly, to prevent the virus’s spread. Those businesses have, in turn, unable to fight city hall, looked to recoup their losses from insurers by alleging bad faith refusal to pay claims. In Oppers Salon & Health Spa, Inc. v. Travelers Property Casualty Company Of America, Case No. 2:20-cv-03342-JDW, United States District Court For The Eastern District Of Pennsylvania (November 30, 2020) the USDC was asked to allow Oppers to collect its Business Insurance losses because of an order by the state to close down to avoid spread of Covid-19.


The Policy

Among other things, the Policy included a Business Income Coverage Form that offers Toppers coverage in the event of certain interruptions to its business. Relevant here, that Form includes both Business Income coverage and Civil Authority coverage.

The Policy covers Business Income loss that Oppers sustains “due to the necessary suspension of your ‘operations’ during the ‘period of restoration,'” if the suspension was “caused by direct physical loss of or damage to property at [the insured’s] premises.” The Policy defines the period of restoration as the “period of time after direct physical loss or damage” and “when the premises should be repaired, rebuilt, or replaced with reasonable speed and similar quality.” Business Income includes “net income … plus continuing normal operating expenses incurred, including payroll.” (emphasis added).

The “Civil Authority” provision covers loss of Business Income and extra expenses incurred due to damage to property other than property at the insured’s premises, when as a result of “dangerous physical conditions,” a civil authority’s actions prohibit access to both the insured’s premises and the area immediately surrounding the damaged property. The damaged property must be within one mile of the insured’s premises to enable a civil authority to have unimpeded access to the damaged property.

The Policy excludes coverage for any “loss or damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or disease.” (the “Virus Exclusion”).) The Virus Exclusion applies to “all coverage under all forms and endorsements” including Business Income and Civil Authority coverage.

The Shutdown Orders

In March 2020, Pennsylvania, New Jersey, and Delaware, issued sweeping stay-at-home orders the states believed would mitigate the further spread of the Covid-19 virus. Those Shutdown Orders referenced that the virus can be transmitted through contact with surfaces and through exposure to airborne particles. As a result of these Orders, Toppers had to suspend operations at all of its locations. In June 2020, Toppers filed a coverage claim for its operating expenses during the suspension period. Travelers denied Toppers’ claim later that month. It explained that Toppers’ loss did not satisfy the Policy’s Business Income or Civil Authority coverage provisions and was also subject to the Policy’s Virus Exclusion, as well as several other exclusions.

Judgment on the Pleadings

After the pleadings are closed–but early enough not to delay trial–a party may move for judgment on the pleadings.


When policy language is clear and unambiguous, a court applying Pennsylvania law must give effect to that language. When a provision in the policy is ambiguous, a court must construe the policy in favor of the insured to further the contract’s prime purpose of indemnification and against the insurer, as the insurer drafts the policy, and controls coverage. Contractual language is ambiguous if it is reasonably susceptible of different constructions and capable of being understood in more than one sense.

The Virus Exclusion

The Virus Exclusion applies to “loss or damage caused by or resulting from any virus … that induces or is capable of inducing physical distress, illness or disease.” The language is not ambiguous, and it applies to Covid-19, which is caused by a coronavirus that causes physical illness and distress. The Virus Exclusion applies to Toppers’ insurance claim.

The Policy’s structure indicates that the parties intended the word “loss” to cover both lost income and continuing expenses. Under the Policy, “Business Income” includes both net income and continuing expenses, and the Policy provides coverage for any “loss of Business Income.”


Even if the Virus Exclusion did not bar coverage, Oppers would not be able to show that the Policy covers its claim, either under the Business Income or the Civil Authority coverage because there was no damage to property. The parties’ agreement to measure the period of restoration against the time it takes to repair the premises indicates that they intended the Policy to cover losses for physical damage, and that intent controls the Court’s interpretation of the Policy since Oppers did not lose use because the premises suffered physical damage.

Civil Authority coverage

Oppers did not close because of damage to a nearby premise or because there was some dangerous physical condition at another nearby premise. It closed because the Shutdown Orders applied to its own operations. Its shutdown and resulting losses, the USDC concluded, fall outside the scope of the Civil Authority coverage.


Businesses nationwide have struggled to stay afloat during the pandemic. While the pandemic has affected the salons, the Policy’s Virus Exclusion is unambiguous and bars Toppers’ coverage claim. Toppers also cannot show that Covid-19 or the Shutdown Orders caused it physical damage or reparable loss under the Policy. Therefore, Oppers is not entitled to summary judgment. On the contrary, the USDC concluded that Travelers has demonstrated that it is entitled to judgment on the pleadings.


This is one of many circuit court decisions concluding that Business Interruption and Civil Authority coverages do not cover losses caused by orders from governments designed to prevent the spread of Covid-19 because the insurance policy required – as a minimum before coverage applies – that there is damage to the insured’s property or to property away from the insured’s premises that caused the government to restrict access to the insured’s property. The virus caused no property damage. The insured could not say what was needed to repair their facilities since there was no damage to repair. Finally, the virus exclusion is clear and unambiguous. Even if the court stretched the language of the policy to conclude that the virus caused property damage that could be repaired, the exclusion prevented coverage. This, and all the other similar cases, reveal that no insurance policy covers every possible cause of loss and insurance cannot solve every problem or loss faced by an insured.

© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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1 Response to Covid-19 Causes No Property Damage & is Excluded

  1. Anthony N Verreos says:

    Thank you Barry –
    It’s good to see any court uphold clear contract language where it exists, and resist the urge to twist or manipulate legal theories to force insurers to pay what they clearly never charged to cover.

    While about half or more of this country’s citizens may object to the forced business lockdowns that have been imposed which have not only hurt thousands of small businesses, but ruined possibly as many, and thrown millions of Americans out of work, we can all sympathize with all who have suffered, yet nothing justifies these claims unless a specific policy actually offers the coverage.

    As an insurance Broker in CA, I responded to the very first industry article on this subject written by another attorney in Jan or Mar (?) essentially saying what you always say – If it’s not covered, it’s not covered.

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