COVID-19 Claims Survives Motion to Dismiss

    The Superior Court for the State of Washington denied the insurer's motion to dismiss the University of Washington's claim for property damage due to COVID-19. The Board of Regents of the University of Washington v. Employers Ins. Co. of Wausau, No. 22-2-15472-1 SEA (Amended Order Denying Defendant's CR 12 (B) (6) Motion to Dismiss, Jan. 4, 2024).

    The parties disputed whether policies issued to University of Washington (UW) covered losses when the COVID-19 pandemic caused UW to close or limit access to its healthcare facilities and athletice facities in 2020 and thereafter. The insurer argued that Washington courts and other state and federal courts rejected such claims because litigants such as UW could not demonstrate any "direct and physical loss or damage" to property. UW countered that its First Amended Complaint (FAC) alleged direct and physical loss and damage to property, with extensive citatios to scientific studies to support its allegations.

    Both parties relied upon the Washington Supreme Court's landmark decision regarding coverage for COVID-19 claims, Hill & Stout, PLLC v. Mut. of Enumclaw Ins. Co., 515 P.3d 525 (Wash. 2022). There, in dicta, the court entertained potential claims under a "loss of functionality" test. Under this theory, a plaintiff might plead that an event like the COVID-19 pandemic caused "imminent danger to the property," "contamination with a problematice substance," or an event "that physically prevented use of property or rendered it useless" or "rendered the property unsafe or uninhabitable because of a dangerous physical condition." 

    UW contended that the functionality theory applied to the allegations in the FAC. The detailed allegations described how the SARS-CoV-2 virus could physically effect and transform both indoor environments and physical surfaces, with extensive quotations and references to scientific data and related studies. Even if invisible, or detectible only through magnificaiton, the depicted effects on the air and hard surfacses had a "material existence" that was "tangible, or perceptible by the senses." The court found these allegations were sufficient to withstand the insurers' motion to dismiss in the pleading stage.

    The court further determined that the policy's "Communicable Disease Decontamination Cost Endorsement" and the "Time Element Loses Due to Contamination by Communicable Desease Endorsement" were not applicable. The motion to dismiss was denied.