In a recent decision remaining unpublished, the Appellate Division turned down the claims made by the well-known fashion brand, Tory Burch. The lawsuit was directed against their insurer, Zurich American, citing property damage and business interruption due to the global COVID-19 pandemic, as well as a breach of contract issue. The legal conflict arose from an all-risk insurance policy Tory Burch had secured from Zurich American, designed to protect against “direct physical loss or damage” to the brand’s property, though this encompassed only specific kinds of losses. As a result of New Jersey’s Governor Phil Murphy declaring a state of emergency back in March 2020, Tory Burch had to close its retail stores to the public until May the same year.
The judicial decision, with its reference to the original verdict, reveals a significant legal aspect: it rejects the plaintiff’s argument claiming that respiratory particles—specifically, droplets and airborne aerosols—are physical substances capable of causing tangible alteration to their insured property. The verdict quotes, “Since the policies here require physical tangible alteration to property, and it has already been determined that coronavirus on surfaces could not physically alter property, factual and expert discovery would be futile.” This statement relies heavily on the legal precedent established by ‘Mac Property’ judgement.
Thus, the Appellate Division’s conclusion in this case hinges on the interpretation of ‘direct physical loss’ involving some form of tangible modification to the property, a definition that, according to the argument upheld by the court, does not align with the impacts of the coronavirus. This ruling fundamentally reveals the limitations of ‘all-risk’ insurance policies, and the crucial role that precise and clear wording plays in insurance contracts and claims.
This case echoes a larger debate on Business Interruption insurance and COVID-19 related claims, and sets a precedent that may affect future claims related to pandemics. For details of the case and the specificities of the judgement, the opinion is a useful read.