Two recent trial court rulings in New Jersey, one federal and one state, have rejected business interruption insurance coverage for New Jersey businesses that were forced to close during the COVID-19 pandemic. N&S Restaurant LLC v. Cumberland Mut. Fire Ins. Co. and Mac Property Group LLC v. Selective Fire and Cas. Ins. Co.;
Both courts held that coverage was barred by a virus exclusion in the insurance policies – an exclusion for any loss caused by a virus or microorganism capable of causing illness. The insureds argued that their losses were caused not by the virus but by Governor Murphy’s Executive Order closing non-essential retail businesses; both courts rejected that argument because the virus exclusion applies to any loss caused “directly or indirectly” by a virus.
The courts also held that, under the policies’ “anti-concurrent causation” clause, the virus exclusion applies regardless of any additional causes of loss or the sequence of causation. In other words, the Executive Order may have caused the business closures, but the virus is what caused Governor Murphy to issue the Executive Order.
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