Relating to Real Estate
Business Interruption Insurance Requires Physical Damage
InCordish Companies, Inc. v. Affiliated FM Ins. Co., No. CV ELH-20-2419, 2021 WL 5448740 (D. Md. Nov. 22, 2021), the U.S. District Court for the District of Maryland ruled against The Cordish Companies, Inc. in its claim against insurer Affiliated FM Insurance Company pursuant to an “all risk” business interruption insurance policy for losses incurred during the COVID-19 pandemic. The District Court held that the business interruption losses that Cordish claimed needed to be accompanied by physical loss or damage.
Cordish’s insurance policy provided $1 billion of coverage for business interruption losses and property damage relating to 97 properties. The premium for the policy was almost $2 million.
The policy read that it insured “property … against ALL RISKS OF PHYSICAL LOSS OR DAMAGE,” except for exclusions. (Emphasis in policy.) The District Court found that “physical loss or damage” unambiguously requires some form of material alteration or physical loss to the subject property. Put another way, “the damage must affect the good itself, rather than the [insured]’s use of that good.”
Cordish argued that certain of its properties were required to close because of directives of civil authorities. It further argued that the policy’s supply chain coverage should apply. To both arguments, the District Court stated that physical damage was required to some property.
The District Court further found that the contamination exclusion barred Cordish’s claims. It concluded its opinion by stating “the unambiguous terms of the business interruption coverage in the Policy do not provide coverage for solely economic losses unaccompanied by physical property damage.”
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