A federal judge in Florida last week denied an insurer’s petition to dismiss a COVID-19 business-interruption lawsuit, while a federal magistrate judge in California threw out a similar claim.

Both lawsuits were filed by plaintiffs whose policies excluded coverage for any damage caused by virus. The California judge said arguments that the exclusion didn’t apply were “nonsense,” while the Florida judge found similar arguments plausible.

The disparate opinions continue a split among state and federal judges across the nation as to whether business income lost because of COVID-19 closure orders is recoverable through “all risk” commercial property insurance policies. Federal courts in New York, Washington D.C., Texas and Michigan and a state court in Michigan have dismissed COVID-19 business-interruption lawsuits. A federal court in Kansas City, Mo., has allowed three such lawsuits to proceed, as has a state court judge in New Jersey.

The latest decision comes from a lawsuit filed by Urogynecology Specialist of Florida against Sentinel Insurance Co. for breach of contract after the carrier denied the medical clinic’s claim for lost income during a statewide closure order. Sentinel said the policy that excluded coverage for “damage caused directly or indirectly by the presence, growth, proliferation, spread, or any activity of fungi, wet rot, dry rot, bacteria or virus.”

U.S. District Judge Anne C. Conway, with the Middle District of Florida in Orlando, found two problems with the insurer’s argument. She said in an order issued Thursday that the section of the policy that referenced the virus exclusion stated that it modified certain coverage forms, but those forms weren’t provided to the court.

More importantly perhaps, Conway said the insurer did not prove that the virus exclusion was “not unambiguous.”

“Denying coverage for losses stemming from COVID-19 … does not logically align with the grouping of the virus exclusion with other pollutants such that the policy necessarily anticipated and intended to deny coverage for these kinds of business losses,” her order states.

Federal Magistrate Judge Jacqueline Scott Corley, on the other hand, found no ambiguity in the insurance policy that the Hartford Financial Services Group had issued to the Franklin European Wax Center in Fresno, Calif. The policy excluded any damage caused by virus.

The wax center argued that it lost income because of the government closure orders, not because of the virus. Corley’s order summed up her opinion about that in one word: “Nonsense.”

The magistrate judge noted that the plaintiff’s complaint states, “􏰅the coronavirus is proliferating onto v􏰀irt􏰁ually􏰃 ev􏰀ery􏰃 su􏰁rface and object in, on, and around commercial premises such as that belonging to EWC Fresno, and thereby causing direct physical damage􏰆.”

Curiously, in another Northern California District case, a federal judge suggested that a pleading that claimed the novel coronavirus was physically on a property may have a better chance of getting a hearing.

U.S. District Court Judge Jon S. Tigar on Sept. 14 granted a motion by Travelers Casualty Insurance Co. of America to dismiss a business-interruption lawsuit filed by Mudpie, a children’s store in San Francisco. But Tigar dismissed the case without prejudice, meaning Mudpie can file again after amending its pleading.

Tigar wrote in his order that he was demising the lawsuit because Mudpie did not allege that any “physical force” had caused it to close the store and suffer a loss of income.

Tigar said it “is doubtful” that Mudpie will be able to establish a “direct physical loss” of property, but granted the plaintiff leave to amend its complaint anyway.

“The court also recognizes, however, that the law concerning business interruption coverage linked to the COVID-19 pandemic is very much in development,” the order states.

Instead of amending its complaint, Mudpie on Wednesday filed an appeal with the U.S. 9th Circuit Court of Appeals.

Michael Levine, a policyholders’ attorney for Hunton Andrews Kurth in Washington D.C., said the state of play so far shows suggests that judge’s are looking for allegations that some tangible, physical change caused the business-income loss.

“The one commonality that we’ve seen so far, the courts are looking for some physical manifestation,” he said. “They are saying the closure orders alone aren’t enough and they are saying they want to see some allegation that COVID-19 has at least affected the property.”

Levine said those early dismissal orders, however, may be overturned on appeal.

*This story ran previously in our sister publication Claims Journal.