In a 24-page bid vying to dismiss the suit, the insurer argued that the presence of coronavirus itself does not cause physical loss or damage.
To emphasize its point, Factory Mutual invoked the Third Circuit's 2002 decision in Port Authority of New York & New Jersey v. Affiliated FM Insurance Co.
, which held that a loss or damage is eligible for coverage if it results in a property's function being "nearly eliminated or destroyed, or the structure is made useless or uninhabitable."And the insurer noted that since surfaces affected by the coronavirus "merely need to be cleaned," coronavirus contamination falls short of meeting the requirements set by Port Authority for physical loss or damage.
"A Pennsylvania court has also approvingly cited a New York judge's comment that the virus 'damages lungs. It doesn't damage printing presses,'" the motion said. "In other words, COVID-19 damages people, not property — thus property insurance policies do not cover it as 'physical loss or damage.'"
The Philadelphia Eagles organization sued Factory Mutual in March, arguing that the insurer wrongfully denied coverage for the team's hefty losses resulting from the COVID-19 pandemic.
The team holds a policy with Factory Mutual that extends coverage capped at $1 billion per occurrence for "all risks of physical loss or damage," court documents show. The team argued that the policy's "time element" coverage should be triggered and that the insurer is on the line for covering business interruption losses.
Factory Mutual, however, denied the team coverage due to the policy's "contamination" exclusion, though the Eagles argued that the exclusion failed to define terms such as "communicable disease," which the team construed as being intentionally excluded under the policy.
The team also argued that the contamination exclusion foregoes coverage only for contamination and any direct costs, rather than loss or damage. The team added that contamination exclusions apply to traditional pollution, not natural catastrophes like a pandemic.
The suit was then removed from state court to a federal venue last week.
But on Thursday, the insurer disagreed with the Eagles' logic and argued that the definition of contamination and its references to "virus," "pathogen" and "disease causing or illness causing agent" includes the coronavirus.
"The Court should not rewrite contract provisions that are otherwise unambiguous to create coverage where no coverage exists," the insurer said in its motion. "Any construction of the Policy's Contamination Exclusion that does not exclude viruses, including the novel coronavirus that causes COVID-19, would create coverage where no coverage was intended to exist. "
Factory Mutual also pointed out that government orders that restrict or reduce property usage are issued to help curb the spread of coronavirus, not because of physical loss or damage, and therefore do not trigger coverage under the policy's time element coverage.
Moreover, loss of use or access to an insured property does not constitute a physical loss or damage, the insurer said, adding that a "loss of use" exclusion within the policy bars the team's claims.
The insurer further argued that a number of courts nationwide have previously recognized that such an exclusion precludes coverage for pure loss of use claims
Indeed, the question of whether businesses are incurring physical damage from the pandemic worthy of loss coverage has fueled widespread debate, as businesses face off with insurers in court over pandemic-related loss claims across the country.
Representatives for the insurer did not immediately respond to Law360's request for comment Thursday. Counsel for the Eagles declined to comment.
The Philadelphia Eagles LP is represented by Charles Fitzpatrick IV and James Murray of Blank Rome LLP.
Factory Mutual is represented by Richard Gable Jr., Adam Masef and Jenaleigh Castano of Butler Weihmuller Katz Craig LLP.
The case is Philadelphia Eagles LP v. Factory Mutual Insurance Co., case number 2:21-cv-01776, in the U.S. District Court for the Eastern District of Pennsylvania.
--Editing by Breda Lund.
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