A recent New Jersey Appellate Division ruling follows the general trend nationally in which courts are, by and large, rejecting insureds’ claims for coverage for business income losses due to government orders related to preventing the spread of Covid-19.  While there have been certain outliers, like the Louisiana Fourth Circuit Court of Appeal’s deeply divided plurality decision earlier this month in Cajun Conti LLC, et al. v. Certain Underwriters at Lloyd’s, et al., the overwhelming majority of courts have ruled in favor of insurers.  Specifically, courts have consistently recognized that physical alteration or damage to covered property is a prerequisite for triggering business interruption coverage under a first-party insurance policy.    Further, courts have almost uniformly enforced virus exclusions.  In this recent decision, the New Jersey Appellate Division followed suit, thereby reinforcing the national trend. 

Covid-19 may cause businesses to be unable to use their property, but loss of use doesn’t constitute the “direct physical loss or damage” necessary to trigger commercial property insurance coverage, according to a first-of-its kind New York appellate court decision issued Thursday.