My Last Comment on Direct Physical Loss Requirement Again
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Post 5096
In Tulalip Tribes of Washington v. Lexington Insurance Co., Wn.App. 2d, 566 P.3d 149 (2025), the Washington Court of Appeals held that COVID-19 does not trigger coverage under an “All Risk” policy that predicates coverage on “direct physical loss or damage” to property. Because the trial court’s ruling in this matter is contrary to Tulalip, the Court of Appeals reversed and remanded to the trial court ordering dismissal.
In The Board Of Regents Of The University Of Washington v. Employers Insurance Company Of Wausau, A Liberty Mutual Company, No. 86493-9-I, Court of Appeals of Washington, Division 1 (June 9, 2025) the question of direct physical loss claims as a result of the Covid Pandemic got resolved again.
THE POLICIES
The University of Washington (UW) obtained from Employers Insurance Company of Wausau (Wausau) “All Risk” insurance coverage for several of its properties. UW sought coverage after government orders relating to COVID-19 required temporary closures of those properties. The relevant policy provisions predicate coverage on “direct physical loss or damage.”
THE SUIT
Wausau denied coverage based on those policy provisions, UW filed a complaint asserting claims for breach of contract, declaratory judgment, bad faith, and violations of the Washington Consumer Protection Act and Washington Insurance Fair Conduct Act. Wausau filed a motion to dismiss the claims based on the policy provisions, and the trial court denied that motion.
ANALYSIS
Construction of an insurance policy is always a question of law. The Court of Appeals examined the policy to determine whether under the plain meaning of the contract there is coverage. If the policy’s language is clear and unambiguous, the court must enforce the policy as written. Also, relevant here, the insured bears the burden of showing that coverage exists.
Thus, the issue is whether UW has alleged the required “direct physical loss or damage” to trigger coverage under the relevant policies for the COVID-19-related losses at issue.
The Court of Appeals rejected the arguments raised by UW for a similar loss of functionality argument in Tulalip because, the insureds in Tulalip maintained possession of the property, the property was still functional and able to be used, and the insureds were not prevented from entering the property.
The Court of Appeals concluded that the insureds’ deprivation was more akin to an abstract or intangible loss. An intangible loss is insufficient to establish direct physical loss or damage. The deprivation must still be caused by a physical impact to the property. The same reasoning and holding apply equally here because, as in Tulalip, UW’s allegations show it suffered an abstract or intangible loss as opposed to a physical loss.
The policies define a “covered loss” as “[a] loss to covered property caused by direct physical loss or damage insured by this Policy.” Thus, as in Tulalip, there must be direct physical loss or damage to property for UW to obtain coverage under the communicable disease coverage endorsements. Because UW has failed to allege such loss or damage the communicable disease coverage endorsements do not apply.
CONCLUSION
In sum, the Court of Appeals reject UW’s arguments regarding its entitlement to coverage under the policies at issue for the same reasons set forth in Tulalip. UW’s breach of contract and declaratory judgment claims fail on this basis. Because Tulalip is directly on point and fatal to UW’s coverage arguments, the Court of Appeals reversed and remanded the case to the trial court for for dismissal.
ZALMA OPINION
About two years ago I proposed to never again write about Covid claims and the need to prove direct physical loss. For reasons I don’t understand parties continue to bring to court cases claiming direct physical loss that is really abstract and intangible losses. Just alleging direct physical loss where none exist wastes the time of the parties, the lawyers, the courts and the courts of appeal. Washington affirmed its precedent that should tell the people of the US to stop trying to make insurers provide a coverage it did not agree to provide.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Fraudulent Joinder of Defendant to Avoid Federal Court Fails
Post 5113
It Never Pays to Sue a Party Who Did Nothing Wrong
The Plaintiffs initiated this action in state court, asserting claims for breach of contract, bad faith, and constructive fraud/negligent misrepresentation against State Farm. They also brought claims for negligent procurement of insurance and constructive fraud/negligent misrepresentation against Tyler McCall and the Tyler McCall Insurance Agency, Inc .
In Justin Gamble and Brittany Gamble v. State Farm Fire And Casualty Company, et al., No. CIV-25-396-R, United States District Court, W.D. Oklahoma (July 2, 2025) State Farm removed the case to Federal Court and alleged that the McCall Agency was fraudulently joined to avoid removal.
KEY ISSUES
Fraudulent Joinder: State Farm removed the case, arguing that Mr. McCall and the McCall Agency were fraudulently joined ...
Attempt at Insurance Fraud Fails
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Post 5112
The following is a fictionalized True Crime Story from my experience of Insurance Fraud. This story explains why insurance fraud is a “Heads I Win, Tails You Lose” situation for insurers and those insured. The story is presented to help you to understand how insurance fraud in America is costing everyone who buys insurance.
Arson on Independence Day Resulted in Prison for the Arsonist
The insured had no respect for his insurance company. He expected them to pay any claim he presented. He expected no investigation. Other members of the same immigrant community had successfully committed arson fraud. It was so easy for others. He decided to burn his house down.
The insured thought he was highly intelligent. He planned his arson fire carefully. He arranged for his wife and children to spend the weekend with their cousins in Oakland. He got four ...
Earth Movement Exclusion Effective as Major Cause of Loss
One of Many Causes of Destruction of House was Earth Movement
Post 5111
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Anti-Concurrent Cause Language Required Claim Denial
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Terri Lawrence sued alleging that State Farm breached an insurance contract and acted in bad faith by failing to pay benefits under the contract. The case was removed to the United States District Court based on diversity jurisdiction, and the trial was set to begin on September 8, 2025.
In Terri Lawrence v. State Farm Fire..., No. C24-4008-LTS-MAR, United States District Court, N.D. Iowa, Western Division (June 25, 2025) the USDC applied anti-concurrent cause language to dismiss suit.
SUMMARY JUDGMENT
...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone 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."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
