COVID Does Not Cause Physical Loss or Damage

There Must be an Actual Change in the Appearance, Shape, Color, Or Other Material Aspect Of The Property for Coverage to Apply

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Plaintiff MTDB Corporation d/b/a Striker Lanes (MTDB) sued seeking declaratory judgment action against defendant, American Auto Insurance Company (AAIC), seeking a declaration that AAIC owed it coverage for alleged business losses and property damage due to the COVID-19 pandemic.

In MTDB Corporation D/B/A Striker Lanes v. American Auto Insurance Company, 2022 IL App (1st) 210979-U, No. 1-21-0979, Court of Appeals of Illinois, First District, Sixth Division (December 30, 2022) the Illinois Court of Appeal followed the Illinois Supreme Court requiring actual physical damage to property and refused coverage to the plaintiff.


MTDB sought coverage under the property coverage and the civil authority endorsement provisions of the policy.

The policy at issue provided property, general liability, and automobile coverages for the policy period of August 19, 2019, to August 19, 20202. The relevant portions of the policy and Section A of the business income coverage form states that:  “[w]e will pay for the actual loss of business income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by direct physical loss of or damage to property at the premises described in the Declarations, including personal property in the open (or in a vehicle) within 100 feet, caused by or resulting from any Covered Cause of Loss.”

In response to MTDB’s declaratory judgment complaint, AAIC moved to dismiss MTDB’s complaint with prejudice. In support of its motion, AAIC indicated that it denied coverage under the policy because MTDB did not suffer direct physical loss or damage to its property as a result of the COVID-19 virus, and further that the government closure of MTDB’s business did not trigger coverage under the civil authority endorsement.

The circuit court granted AAIC’s motion to dismiss the complaint based on the allegations in the complaint, MTDB was required to suspend or significantly reduce its business operations because of executive orders and that the losses sustained by MTDB were economic and not due to permanent loss of or physical alteration to property.

The circuit court relied on the supreme court’s decision in Travelers Insurance Co. v. Eljer Manufacturing, Inc., 197 Ill.2d 278 (2001) in holding that the plain and ordinary meaning of “physical injury” is damage to tangible property that causes an alteration in appearance, shape, color, or other material dimension, and that MTDB had not alleged that the probable presence of COVID-19 in, on, or around their property caused any alteration in their property’s appearance or any other material dimension.


Since a motion to dismiss admits all well-pleaded facts and attacks the legal sufficiency of the complaint in ruling on a motion to dismiss, only those facts apparent from the face of the pleadings, matters of which the court can take judicial notice, and judicial admissions in the record may be considered.

When an insured sues its insurer over a denial of coverage, the existence of coverage is an essential element of the insured’s case, and the insured has the burden of proving that his loss falls within the terms of his policy. Just because a term is undefined by the policy does not render it ambiguous. Where a term in an insurance policy is not defined, the court gives that term its plain, ordinary, and popular meaning.

As the Court of Appeal concluded in earlier cases, according to the Illinois Supreme which defined “physical” for purposes of interpreting direct physical loss or damage for insurance coverage, there must be an actual alteration to the appearance, shape, color, or other physical aspect of the property in order for there to be coverage under the policy. The supreme court was quite clear that under its plain and ordinary meaning, “physical” meant just that- pertaining to natural or material things. Accordingly, the circuit court did not err in reaching that conclusion.

The COVID-19 virus does not alter the appearance, shape, color, or other physical aspect of the property to trigger coverage under the policies at issue. Contamination by the COVID-19 virus can be remedied by routine cleaning or disinfecting of surfaces and the air, all without altering the appearance, shape, color, or other material aspect of the property. Therefore, COVID-19 could not constitute a physical alteration of the property so as to trigger coverage under the policy.


Lawyers are persistent people who believe they have better arguments than other lawyers. They continue to argue that Covid-19 caused actual physical damage to the plaintiff’s property and they continue to fail to convince courts, even after the state’s Supreme Court sets the standard. It just doesn’t work and soon dealing with these suits will annoy the trial and appellate courts who will either refuse to hear the cases or sanction those who bring these suits. This is the last Covid Property damage claim I will report on.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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