“Virus Exclusion” Defeats Attorney’s Insurance-Coverage Claim

In a recent case, Michael J. Redenburg, Esq. PC v. Midvale Indemnity Company, 20-cv-05818, 2021 WL 276655 (S.D.N.Y. Jan. 27, 2021), the court, inter alia, granted defendant insurance company’s motion to dismiss the plaintiff attorney’s complaint, which sought a declaration that the firm’s commercial property insurance policy covered its losses caused by stay-at-home and social-distancing directives issued by New York State in response to the COVID-19 pandemic.

The court summarized plaintiff’s position as follows:

Redenburg claims that it has suffered significant losses as a result of governmental orders, imposed following the onset of the COVID-19 pandemic, which closed non-essential offices. Compl. ¶ 2. These included New York’s State’s order, imposed on March 20, 2020, which required non-essential workers to stay at home, and its order, imposed on April 17, 2020, which required persons over age two to wear a face covering when in public. Id. ¶¶ 34–35. Redenburg alleges that, although he continued to go to his office, his clients could not, which harmed the firm’s business, which relies on “face-to-face interactions” with clients. Id. ¶ 36; see also Redenburg Letter at 2. Redenburg also notes that, as a result of state mandates limiting new filings in state court to emergency matters, between March 20 and May 25, 2020, he was unable to file new civil actions in state court. …

Redenburg invokes four sections of the Policy: those relating to “Business Income,” “Extra Expense,” “Extended Business Income,” and “Civil Authority.” Compl. ¶ 41. Critically, each of the four sections extends coverage only to a “Covered Cause of Loss.” A Covered Cause of Loss is defined as “[r]isks of direct physical loss unless the loss is [e]xcluded in Paragraph B …,” which is entitled “Property: Exclusions.” And subsection (1)(j) within Paragraph B, entitled “Virus or Bacteria,” excludes from a Covered Cause of Loss any “loss or damage caused directly or indirectly by … [a]ny virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness or diseases.” Policy at MIC16, 29, 31. It adds that “[s]uch loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” Id.

The court then explained why plaintiff failed to state a claim:

Redenburg’s claimed loss falls squarely within the Policy’s virus exclusion. Redenburg resists this conclusion, on the grounds that the firm’s loss most immediately results not from the COVID-19 virus, but from New York’s State’s stay-at-home and social-distancing orders. But that formulation does not salvage his claims under the Policy. As Redenburg’s Complaint itself repeatedly recognizes, these emergency orders were prompted by the virus. See, e.g., Compl. ¶ 25 (“[T]he efficient proximate cause of Plaintiff’s losses, were precautionary measures taken by the State of New York to prevent the spread of COVID-19 in the future[.]”); id. ¶ 34 (“On March 20, 2020, the State of New York issued a stay-at-home order that all non-essential workers must stay home as a result of the COVID-19 pandemic.”); id. ¶ 45 (“The COVID-19 pandemic is physically impacting public and private property, and physical spaces and cities around the world…. Any effort by the Defendant, MIDVALE, to deny the reality that the pandemic causes physical loss and damage would constitute a false and potentially fraudulent misrepresentation[.]”); id. ¶ 46 (“A declaratory judgment determining that the insured Plaintiff is entitled to business loss coverage under the policy is necessary to prevent Plaintiff from being left without bargained-for insurance coverage required to ensure the survival of his law firm due to the Civil Authorities’ response to the COVID-19 pandemic.”). And the virus exclusion, by its terms, applies to loss or damage “directly or indirectly” caused by a virus.

That the state’s stay-at-home orders were, in the sequence of causation, one step more proximate to Redenburg’s losses than the virus thus does not bring Redenburg’s claims outside the exclusion. The Policy’s language that damage caused “directly or indirectly” by “[a]ny virus” “regardless of any other cause or event that contributes concurrently or in any sequence to the loss” forcefully reinforces the point. See Borah, Goldstein, Altschuler, Nahins & Goidel, P.C. v. Trumbull Ins. Co., 2016 N.Y. Slip Op. 32736, at *29–32 (Sup. Ct. Apr. 5, 2016) (where policyholder sought coverage under civil-authority provision based on evacuation order, finding exclusion for flooding to apply because the order was prompted by the potential for flooding).

*8 Plain language thus excludes recovery under all four Policy sections on which Redenburg relies.

The court notes that its “holding aligns with those of other courts around the nation that, in recent months, have held insurance claims for business income excluded under similarly worded virus-related exclusions.”

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