Confirming the growing split of decisions among federal courts addressing COVID-19 insurance issues, two district courts in the Fifth Circuit differed in their interpretation of virus exclusions, with one denying coverage and the other permitting the policyholder’s claim to proceed.

On November 4, a Mississippi federal district court dismissed a restaurant’s complaint for business interruption losses from COVID-19 shutdown orders because the plaintiff did not allege tangible damage or “permanent dispossession” of use of the property (see Real Hospitality, LLC v. Travelers Cas. Ins. Co. of Am.).The court emphasized that the policy insures the property itself, not the restaurant’s operations.

The court agreed that the words “loss” and “damage” in the coverage grant for “direct physical loss of or damage to” property must be given “separate effect,” but concluded that only a permanent dispossession of the property, such as a theft, would trigger coverage. The court reasoned that this interpretation squared with the definition of the “Period of Restoration,” which ended when the property is “repaired, rebuilt or replaced” or when “business resumed at a new permanent location.” The court distinguished cases involving odors, contamination, or imminent threats as “tantamount to physical loss or damage.” The court also held that the virus exclusion would eliminate any coverage otherwise available for coronavirus-related losses.

On the same day, a federal district court in Texas upheld a barbershop’s COVID-19 claim despite a virus exclusion (see Independence Barbershop, et al. v. Twin City Fire Ins. Co.). Although the virus exclusion barred the policyholder’s broader claims, the court denied the insurer’s motion to dismiss the claim under an endorsement that expressly provided virus coverage. This decision reminds policyholders that virus exclusions do not bar all coverage, particularly endorsements that separately provide virus coverage.

These decisions also show that courts continue to focus on specific policy language and allegations in deciding early COVID-19 insurance cases. The factual details matter. And so do the words of the policy. Some policies do not expressly require proof of “direct physical loss of or damage to” your property to trigger business income coverage. Others incorporate forms and endorsements that may expressly grant or exclude loss caused by virus. Each case and policy require detailed analysis. If you have a business loss or pending claim and have not consulted an insurance attorney to address these issues, consider doing so.