Real Estate Business Denied COVID-19 Coverage After Court Determines No Physical Loss Occurred
SAS International, Ltd. operates a real estate business in which it owns and leases commercial properties to other businesses in Fall Rivers, Mass.
At the onset of the COVID-19 pandemic in March 2020, SAS was required to suspend business operations at several of its establishments. The subsequent shutdowns, SAS said, caused the real estate business to suffer losses to its “business volume and practices,” which have yet to return to pre-loss capacity over a year later.
In July and August of 2020, SAS submitted a claim to its insurance company requesting coverage for its losses. SAS held a commercial lines policy through General Star Indemnity Company.
Upon reviewing the case, however, General Star denied SAS’s claim.
The insurer noted that the policy’s “Building and Personal Property Coverage” clause only included coverage for “direct physical loss of or damage to covered property … caused by or resulting from any covered cause of loss.”
It further pointed out that a covered cause of loss was defined as any “direct physical loss unless the loss is excluded or limited in this policy.”
SAS filed suit in November 2020, seeking declaratory judgment that the General Star policy covers its pandemic-related losses and that no exclusion limits applied. General Star moved to dismiss in December.
The court reviewed both arguments. Noting that SAS is not alone in seeking coverage for OVID losses, the court asked SAS to provide proof that a direct physical loss had occurred. But the real estate company could not.
Scorecard: SAS International will not receive insurance coverage from General Star for its COVID-19-related business losses.
Takeaway: You win some, you lose some. In this case, the language of the policy held true. But there are several other COVID lawsuits still pending, with some finding victory in court. Insurers need to review what their policies say and what plaintiffs are using as leverage in court. &