Thor Equities, LLC v. Factory Mutual Insurance Company

Background

Thor Equities, LLC sued Factory Mutual Insurance Company seeking damages and a declaration that Factory Mutual had to pay losses arising from the COVID-19 pandemic under a property-insurance policy. The policy covered property against “all risks of physical loss or damage” and provided coverage for certain business-interruption losses directly resulting from physical loss or damage. It also contained two communicable-disease provisions with a combined $1 million aggregate limit.

The communicable-disease provisions covered losses or costs when an insured location had the “actual not suspected presence” of a communicable disease and access was limited, restricted, or prohibited either by a government order regulating that actual presence or by a decision of a Thor officer resulting from that actual presence.

After discovery, Thor moved for partial summary judgment, and Factory Mutual moved for summary judgment. The court had already granted Factory Mutual’s motion and denied Thor’s motion as moot on September 29, 2023. This opinion explained those rulings.

Physical Loss or Damage

Applying New York law, the court held that COVID-19 did not constitute physical loss or damage to Thor’s insured properties. The court reasoned that the virus was harmful to people rather than buildings, typically lasted about three days on common indoor surfaces, could be eliminated with standard cleaning and disinfecting products, and did not alter the covered property.

The court also held that Thor’s alleged losses concerned the loss of use of its properties, rather than physical loss or damage. Under the New York precedent discussed by the court, “loss of” property does not include merely losing the ability to use that property. The court rejected Thor’s argument that COVID-19 was a physical event comparable to the event involving defective soda in another case because, unlike that product, COVID-19 had not physically damaged or seriously impaired the function of the insured property.

The court therefore ruled that Thor could not recover under the policy provisions requiring physical loss or damage.

Communicable-Disease Provisions

The court separately interpreted the communicable-disease provisions. It held that those provisions unambiguously did not require physical loss or damage. The court treated them as an exception to the policy’s general physical-loss-or-damage requirement because the provisions did not include that condition, while other additional-coverage provisions expressly did.

Even so, the court held that Thor failed to satisfy the provisions’ contractual requirements. The court identified two requirements: an actual, not merely suspected, presence of COVID-19 at the insured properties; and access limitations caused either by a government order regulating that actual presence or by a decision of a Thor officer resulting from that actual presence.

The court did not need to resolve the parties’ dispute over whether Thor proved the virus’s actual presence. It held that Thor could not satisfy the second requirement. The government orders described in the record were based on whether businesses were essential, not on confirmed COVID-19 at Thor’s locations. The court also found that Thor had not argued, and the discovery evidence did not establish, that a Thor officer limited, restricted, or prohibited access because of the actual presence of COVID-19.

Disposition

The court reaffirmed its September 29, 2023 order granting Factory Mutual’s motion for summary judgment and denying Thor’s motion for partial summary judgment as moot. The opinion also stated that Thor’s time to appeal ran from the date of the opinion.