MADISON, Wis. (Legal Newsline) - Wisconsin restaurants that were prohibited from providing in-person dining during the 2020 Covid-19 lockdown can’t access insurance policies that protected against business losses due to physical damage or “contamination,” the state’s highest court ruled.
Tackling an issue that has landed in courts around the country, the Wisconsin Supreme Court, in a June 1 decision, rejected arguments standard language in insurance policies covered pandemic-related losses. Collectivo Coffee Roasters, representing a number of restaurants, sued Society Insurance to collect on polices that included clauses covering “the actual loss of business income” and damages if local health authorities shut the business down.
None of the language applied to Covid lockdown orders, the state’s high court ruled.
Colectivo bought the policy in early February 2020 and the following month Wisconsin ordered a stop to in-person dining, although restaurants could still offer takeout service. Colectivo and others sued Society, arguing the lockdown order had an effect equivalent to a “direct physical loss of or damage to" Colectivo's property under the policy. The policy had a separate contamination provision that covered expenses if public health authorities prevented Colectivo from accessing its property. The policy defined contamination as a “defect, deficiency, inadequacy or dangerous condition.”
A trial court allowed the lawsuit to proceed, but also approved an immediate appeal that proceeded directly to the state Supreme Court. At the high court, Colectivo argued it suffered a direct physical loss because of “Covid-19 particles” on its property and lost the use of its property because of the lockdown order.
“We reject both arguments because neither alleges a tangible harm to Colectivo's physical property necessary to trigger coverage,” the Supreme Court said. “Although Colectivo could not use its dining room for in-person dining for a period of time, the dining room was still there, unharmed——it was not physically lost or damaged.”
The decision is consistent with similar rulings by courts in North Dakota and the Seventh Circuit, the Wisconsin Supreme Court said. It criticized as mistaken a federal court decision from Illinois that went against Society, finding that an actual physical loss was unnecessary.