Wisconsin Supreme Court rules against insurance coverage for COVID losses

The Wisconsin Supreme Court ruled on Wednesday, June 1, that businesses are not entitled to insurance coverage for losses resulting from the COVID-19 pandemic and related public safety restrictions.

As reported by Reuters, the midwestern state’s highest court ruled unanimously that government-imposed indoor dining restrictions should not trigger coverage under property insurance policies, and neither should the presence of the COVID-19 virus within business premises.

The decision overturned a February 2021 ruling by a Milwaukee judge in favor of Colectivo Coffee Roasters, which operates a chain of cafes in the state. Colectivo was allowed to proceed with a class action on behalf of businesses insured by Society Insurance, to try and recover financial losses under several clauses of Society’s property insurance policies, including business-income interruption.

However, Justice Rebecca Frank Dallet ruled against the café chain because it failed to declare that the presence of the COVID-19 virus or the loss of the use of its properties created a “tangible harm,” which would be necessary to trigger coverage.

According to the Reuters report, Justice Dallet said the presence of COVID-19 cannot constitute a physical loss or damage to property because the virus does not alter a property’s appearance or structure.

“One may think of the business-income provision as indirect loss-of-use coverage, but that does not change the fact that a prerequisite for that provision is still a direct physical loss or damage,” Dallet wrote for the 7-0 court.

The Wisconsin Supreme Court followed the top courts of Massachusetts and Iowa, who reached similar conclusions in April around whether property insurance policies will cover COVID-19 related losses. When reporting the court’s decision, Justice Dallet cited the “overwhelming majority” of courts across the US that have ruled in similar cases.