Riker Danzig’s Insurance Group prevailed at the Appellate Division of the New Jersey Superior Court in a COVID-19 coverage case on behalf of long-time client Mitsui Sumitomo Insurance Company of America. At issue in the case were COVID-19 pandemic-related business losses suffered by a group of hotels, Highgate, who sought up to $600 million in coverage from their insurers under provisions that required proof of direct physical loss or damage. The companies claimed that the virus physically altered surfaces and items in their properties.
The trial court concluded that the companies had shown no direct physical loss or damage to their properties and held that multiple exclusions would bar coverage if it existed, and dismissed the suit.
The companies appealed the decision, arguing that the trial court wrongfully applied New York law, misinterpreting the “direct physical loss or damage” language and various exclusions in the policies.
While the New Jersey appeals court agreed that the lower court improperly applied the choice of law analysis, it found that there was no “fundamental difference in New York and New Jersey’s laws regarding the interpretation of the phrase ‘physical loss or damage to,’’’ and that the choice of law question was therefore “inconsequential.” The appeals panel stated that since both states require a tangible physical alteration of property to trigger coverage, deciding the case under New Jersey law did not help the companies’ case.
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