Big I Insights

Property Damage – Is It Because the Government Says It Is?

By | May 27, 2020

Property Damage: Is it “Property Damage” Just Because a Jurisdictional Order Uses the Term “Property Damage”?

Some plaintiff attorneys are almost giddy over the fact that several jurisdictions used the term “property damage” in their respective emergency declarations to justify closing “non-essential” businesses. These attorneys are hopeful that such wording gives them the ability to trigger a business income claim. Given the facts as that have developed since the situation began and those that are continuing to develop, pinning any hopes on such wording appears futile (but it’s entertaining to watch).

Insurance Journal’s article “Business Interruption Claimants Like How Some Localities Worded Emergency Orders,” introduced this discussion, but it doesn’t address the question, does the government calling the presence of a virus on a surface “property damage” factually make it property damage? Does stating something is blue in an emergency declaration make it blue?

Neither local, municipal nor executive orders appear to carry the force of a law, nor is it likely such orders change the facts of physical science. Property damage and what constitutes property damage is not dependent on terms used in an order intended to close businesses not seen as essential to the public good (other than the “public” who happens to own the shuttered business).

Examples of these orders appear to be limited to counties or local orders rather than statewide orders. Orders applying “property damage” wording often read similar to this from New Orleans’ second order:

  • Whereas, there is reason to believe that COVID-19 may be spread amongst the population by various means of exposure, including the propensity to spread person to person and the propensity to attach to surfaces for prolonged periods of time, thereby spreading from surface to person and causing property loss and damage in certain circumstances….

Obviously, certain assumptions were made in the crafting of these declarations. The first is that the virus has a “propensity to attach to surfaces for prolonged periods of time.” This has since proven to be incorrect.

A University of Alabama study published in the New England Journal of Medicine stated that the maximum amount of time the virus can live on certain surfaces is up to three days. Further, the CDC states that property to person infection is not a primary cause of infection.

Given this, the first presumption appears to be incorrect – lessening the effect of this hoped-for lifeline towards proving property damage.

Second, and more disappointing for plaintiff attorneys, simply saying something causes property damage does not change the requirements of physical science. “Damage” is generally understood to mean a physical change in condition such that repair is required. In the case of the presence of a virus, what repair is required? The only possible type of required “repair” is cleaning the surface or the loss of the virus’ viability.

Additionally, the business income form requires more than just “damage” to trigger coverage, there must be “direct physical loss of or damage to property.” This is more than simply saying, “hey, there is damage.” The Big I through its Virtual University has penned several articles detailing the specifics of business income and what is required to trigger coverage:

Lastly, the jurisdictional authorities seem to have hedged their bets with the closing phrase, “in certain circumstances.”

Simply, such wording in these executive orders does not appear to provide any benefit to the plaintiff attorneys. Improper assumptions and declaring a “fact” without evidence or the support of physical science does not change the reality. After all, if the executive order said the sky was green, that would not make it green.

About Christopher J. Boggs

Chris Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS, is a veteran insurance educator. He is Executive Director, Big I Virtual University of the Independent Insurance Agents and Brokers of America. He can be reached at chris.boggs@iiaba.net. More from Christopher J. Boggs

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