Jul 12, 2021

Firm Obtains Dismissal in COVID-19 Business Interruption Suit

Ford Marrin obtains dismissal of a $500 million COVID-19 coverage claim asserted against its client, Zurich American Insurance Company (“Zurich”), by the global fashion house, Capri Holdings (“Capri”), which owns a number of fashion brands, including Versace, Michael Kors and Jimmy Choo.

In an action pending in the New Jersey Superior Court, Bergen County, under docket no. BER-L-002322-21, Capri demanded reimbursement under two commercial property insurance policies issued by Zurich, for alleged business interruption losses Capri sustained as a result of the COVID-19 pandemic. We argued on behalf of Zurich that Capri was not entitled to the requested coverage because its losses were not the result of “direct physical loss of or damage to” its property, which is a prerequisite for business interruption coverage under the applicable policies.

Capri argued that the direct physical loss or damage prerequisite for coverage was satisfied by its claim because: (i) a number of its employees were diagnosed with COVID-19 and combined with the foot traffic in those stores and the positivity rate of the disease, the Coronavirus was statistically certain to be present in its stores and on its merchandise and (ii) the government orders restricting Capri from opening its stores to the public destroyed their functionality. The court rejected those arguments, and instead accepted the arguments made by us on behalf of Zurich. Specifically, we argued that: under New Jersey law for Capri to be entitled to coverage, there must have been structural alteration of the property requiring repair or replacement or physical contamination so severe as to render the property totally uninhabitable for use, which Capri failed to allege, and for which the court dismissed its complaint with prejudice.

Partners Michael L. Anania and John A. Mattoon and Associate Andrew F. Oberg worked on this matter.

By, Michael L. Anania