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Law360 (November 5, 2020, 10:23 PM EST ) A New Jersey state judge on Thursday said a bakery's expectation for COVID-19 business loss insurance coverage is "not reasonable," since the policy's virus exclusion is "clear and unambiguous."
Judge Steven J. Polansky shot down Mac Property Group LLC and the Cake Boutique's suit seeking a declaration that the bakery's loss from the COVID-19 government shutdowns is covered by its policy with Selective Fire and Casualty Insurance Co.
"Because the court finds the policy language, the virus exclusion, to be clear and unambiguous, any expectation of coverage by the insureds is not reasonable," the judge said.
In the opinion, Judge Polansky said it does not matter whether the bakery's business closure constituted physical damage, or whether civil authority coverage is triggered, because "the reason for the exercise of that civil authority was the virus."
The bakery's claimed loss from the COVID-19 shutdowns is excluded under the anti-concurrent causation provision of the policy, the judge said.
The bakery, which was forced to shut down in March due to government closure orders, has argued that because it could not use its property as intended, it suffered direct physical loss or damage to the property covered by the policy. The bakery has also said it has a reasonable expectation for coverage because its loss was caused by the shutdown orders instead of the virus.
The cake shop failed to show any policy language that could create its alleged reasonable expectation for coverage, Judge Polansky said on Thursday. "Reasonable expectations must be based upon the insurance contract itself, and not on an insured's subjective belief about what insurance should cover."
Though the bakery refused to acknowledge that COVID-19 is a virus at oral argument, its own complaint said it suffered a loss caused by "the SARS-CoV-2 virus," and the government's stay-at-home restrictions were issued to prevent the spread of COVID-19, the judge said.
"The allegations of the complaint itself essentially are that a virus, specifically COVID-19, was the cause of the governmental action," Judge Polansky said.
Representatives from the parties could not be immediately reached for comment Thursday.
Mac Property Group and the bakery are represented by Robert W. Williams of Mattleman Weinroth & Miller P.C.
The insurer is represented by Joseph K. Scully and Elizabeth J. Sher of Day Pitney LLP.
The case is Mac Property Group LLC et al. v. Selective Fire and Casualty Insurance Co. et al., docket number L-2629-20, in the Superior Court of New Jersey.
--Editing by Janice Carter Brown.
For a reprint of this article, please contact reprints@law360.com.
