When the wave of shutdown orders hit small businesses in the Spring and Summer of 2020, many owners looked at their insurance policies to see if they had insurance coverage for their business losses. Buried in the standard policy was a provision that looked daunting:
“Fungi”, Wet Rot, Dry Rot, Bacteria And Virus: We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss: (1) Presence, growth, proliferation, spread or any activity of “fungi”, wet rot, dry rot, bacteria or virus.
Read broadly, that exclusion seemed to foreclose any coverage. After all, there can be little doubt that the COVID-19 virus was the cause of the shutdowns, at least “indirectly.” And many courts throughout the country have reached that exact conclusion.
Even within Virginia, Judge Brinkema of the Eastern District of Virginia, Alexandria Division, concluded that “the overwhelming authority” supports a finding that the standard virus exclusion prevents coverage for shutdowns related to COVID-19.
But for Virginia small businesses that still hold out hope for insurance coverage, another judge in the district has reached the opposite conclusion. In Elegant Massage, LLC, v. State Farm Automobile Insurance Company and State Farm and Casualty Company, 2:20-cv-265 (E.D. Va.), Judge Raymond Jackson has denied a motion to dismiss on this same issue. In that case, a massage parlor was forced to shut down due to COVID-19 orders. The Court found that the virus exclusion does not apply because there was no allegation “there is a presence of the virus at the covered property” nor that the “virus is the direct cause of the property’s physical loss.” Without “virus contamination at the Plaintiff’s property,” the Court concluded that the insurers could not prove the virus exclusion applied.
It will be very interesting to see how other judges in the District rule. For any businesses who have an “all risks” insurance policy in cities around Norfolk and Newport News where Judge Jackson sits, it may be worth an examination of their policy with an attorney to see whether there is coverage under Judge Jackson’s reasoning.
 See TRANSCRIPT OF MOTION HEARING BEFORE THE HONORABLE LEONIE M. BRINKEMA UNITED STATES DISTRICT JUDGE, November 10, 2020, Civil Action No. 1:20cv632, at 16:11-19.