A federal judge in Kansas City ruled that policyholders whose businesses have been interrupted as a result of the coronavirus pandemic may proceed with their cause of action against their insurers.

U.S. District Court Judge Stephen Bough of the Western District of Missouri who is presiding over a case involving multiple business owners ruled Aug. 12, 2020, that policyholders claiming a loss due to the pandemic may move forward with their cases because they made a plausible argument that their property losses were a direct physical loss attributable to COVID-19.

The seven business plaintiffs in the Kansas City case, led by Studio 417 salon, argued that coronavirus is a widespread airborne virus that very well could have been present in its business establishment, even though it might be undetectable by the naked eye. The presence of this virus rendered their businesses unsafe and unusable, thereby forcing their shutdowns by various municipalities or states’ orders. That shutdown, they argued, triggered their insurance coverage due to the presence of the virus that led to a physical loss even it did not cause structural physical damage. Studio 417, Inc., et al. v. The Cincinnati Insurance Co., Case No. 20-cv-03127-SRB.

Judge Bough ruled that under the ordinary meaning of “physical loss,” the policyholder suffered a loss when the spread of coronavirus led to prohibition or restrictions on their businesses. He cited a previous case of U.S. District Court Judge Catherine Perry of St. Louis in Mehl v. Travelers that denied summary judgment to an insurance company when a policyholder alleged his house was uninhabitable because of an infestation of spiders. “Mehl supports the conclusion that ‘physical loss’ is not synonymous with physical damage,” Judge Bough wrote in his opinion, and further commented that “other courts have similarly recognized that even absent a physical alteration, a physical loss may occur when the property is uninhabitable or unusable for its intended purpose.”