No Direct Physical Loss & Exclusion for Losses Due to Microorganisms Defeats Claim
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The COVID-19 pandemic forced numerous businesses to close their doors or to reduce operations temporarily. Many suffered severe economic losses as a result and have sought money under their business property insurance policies. In this case under our diversity jurisdiction, we address two insurance coverage issues arising out of the partial closure of the Ritz-Carlton hotel in Dallas, Texas. In Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Company, No. 21-1316, United States Court of Appeals, Seventh Circuit (December 9, 2021) the Seventh Circuit dealt with three Covid Cases and found no coverage and rejected creative arguments that the lawyers for the Plaintiffs raised.
FACTS AND PROCEDURAL HISTORY
Crescent filed a claim with Zurich, which denied the claim in large part as beyond the scope of the 2019 and 2020 policies’ coverage.
DISCUSSION
The first issue presented is whether Crescent has alleged direct physical loss or damage to its property. The Seventh Circuit concluded that it has not.
The Microorganism Exclusion
The microorganism exclusion appears in both the 2019 and 2020 policies that Zurich issued for Crescent’s hotel. Crescent does not dispute that its alleged losses arose from and were related to the coronavirus. The question is whether the virus qualifies as a “microorganism” under the terms of the exclusion.
The relevant language is deliberately broad, covering microorganisms of any type, nature, or description, and applying broadly to any substance whose presence poses an actual or potential threat to human health, which the coronavirus undeniably does.
Fundamentally belt-and-suspenders modifications to policy language simply do not compel the inference that prior policy language did not require the same result.
In reaching this decision the Seventh Circuit adopted the analysis of today’s decision in Sandy Point Dental, P.C. v. Cincinnati Insurance Co., No. 21-1186 (7th Cir. Dec. 9, 2021). It concluded, in addition, that the microorganism exclusion in the policy independently bars coverage for the hotel’s claimed losses.
ZALMA OPINION
Although some of the best lawyers in the country have raised many creative attempts to get around the “direct physical loss” requirement and the microorganism exclusions like those in this case, the courts of the United States continue to properly refuse to rewrite a policy that was entered into by two sentient beings. It is essential to read the words of a policy and interpret it as the parties expected before there was a loss. The Seventh Circuit did so and ruled in the only way possible on the facts and the policy wording.
© 2021 – Barry Zalma
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See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime.
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As part of the investigation, the FBI obtained an August 19, 2022 warrant to search Driscoll’s Sterling Pharmacy Yahoo email account for emails from January 1, 2018 through December 31, 2020. Driscoll moved to suppress the resulting evidence, arguing that the warrant lacked probable cause, was overbroad, and rested on material misstatements and omissions.
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See the video and at https://rumble.com/v7ctgmq-the-great-jewel-theft.html at https://youtu.be/aRbQ2sJfGwA
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the ¬¬¬Perpetrators than any Other Crime.
The Insured purchased, for the first time in his life, a policy of Personal Articles Floater Insurance (PAF) scheduling $125,000 worth of ladies jewelry. He advised the insurer that the jewelry was always kept in a class E safe at his residence. He also told the insurer that he was employed full time as the owner of a gasoline service station and that he had never been canceled or suffered a previous loss.
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Post 5421
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Rescission for Material Misrepresentation
Post 5418
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An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
