On August 12, 2021, the U.S. District Court – District of New Jersey, ruled that a group of restaurants located at the Jersey Shore were not entitled to coverage as a result of losses incurred due to Covid-19 under certain policies that contained a virus exclusion.

The restaurants sought to recover benefits under Business Income and Extra Expense coverage provisions pursuant to their applicable policies. These claims were denied under a Virus Exclusion in the policies. The restaurant brought suit, seeking a declaration that Defendant, Twin City Fire Insurance Company, was obligated to provide coverage for the restaurants' alleged losses, asserting claims of breach of contract and bad faith.

The restaurants argued that the Virus Exclusion only applied to conditions regarding the premises itself, as evidenced by the use of the terms like "presence" and "growth," and did not apply to instances such as the Covid-19 pandemic. The restaurants also argued that New Jersey Governor Phil Murphy's Executive Orders, which imposed mandatory closures and certain restrictions on restaurants, were responsible for their losses.

Chief Judge Freda L. Wolfson rejected the restaurants' arguments and dismissed the Complaint. The Court found that "the Virus Exclusion broadly applies to any loss caused by a virus", and any other interpretation "would require the Court to add language that does not appear in the Policy." Judge Wolfson similarly rejected the restaurants' argument regarding the Executive Orders, finding that Covid-19 virus was a contributing cause of the losses, not the resulting Executive Orders, and that the policy "specifically provide that loss or damage caused by a virus 'is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.'” In light of the above, the restaurants' bad faith claim also failed.

The Court's opinion is consistent with prior holdings in the District of New Jersey and other federal courts throughout the country.

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