Wash. Federal Judge Tosses COVID-19 Coverage Actions for Lack of ‘Direct Physical Loss’

SEATTLE — A federal judge has dismissed consolidated COVID-19 coverage actions filed by several Washington small business owners, ruling that government shutdown orders issued in response to the pandemic do not cause “direct physical loss” to property, as required by the policies.

In a May 28 order, Judge Barbara J. Rothstein of the U.S. District Court for the Western District of Washington explained that “interpreting direct physical loss to include only tangible dispossession aligns with insurance law doctrine which holds that all-risk contracts are intended to cover damage to property, not economic loss.”

The lawsuits demanded coverage for losses …