Colorado Restaurant Failed to Prove Physical Loss from COVID-19

Colorado Restaurant Failed to Prove Physical Loss from COVID-19


In the wake of the COVID-19 pandemic, restauranteurs are facing a litany of issues.  With changing governmental restrictions, restaurants have had to adapt more than most businesses.  Some restauranteurs have taken to the courts to try and recoup losses.  In a recent Colorado case, the court examined loss coverage stemming from the pandemic.



In Sagome, Inc. v. Cincinnati Ins. Co, Plaintiff, a restaurant, believed its losses during the pandemic were covered by its insurance.[i]  The restaurant claimed:

…it sustained business income losses as a result of measures that the Colorado state government imposed in response to the pandemic, such as restrictions on restaurant services to delivery and takeout options only and reduction in restaurant capacity.

Among plaintiff’s arguments was the allegation “that COVID-19 exposure constitutes physical damage to property because the virus can exist on surfaces in the restaurant.”  There was no virus exclusion clause in the contract.  Plaintiff’s arguments relied upon defendant’s “failure to define ‘physical loss’ and ‘physical damage…’”

The court cited to a variety of persuasive authorities that disagreed with plaintiff’s contention.   According to defendant, more than 70 cases served as persuasive authority for its argument against coverage.  In those cases, defendants across the country won arguments on COVID-19 loss coverage.  Here, the fact that there might be COVID-19 on the premises at plaintiff’s restaurant did not qualify them for coverage under the policy.  There was no physical loss.  The court ruled in favor of defendant, dismissing the case with prejudice.



Insurers should expect to see continued litigation based on the pandemic, especially in the restaurant industry.  However, insurers may not need to worry too much about these kinds of viral contamination arguments.  According to the judge in this case, the overwhelming majority of courts that have addressed the issue have determined that potential viral contamination is not physical damage, given that it does not alter the structure of the insured property.



[i] Sagome, Inc. v. Cincinnati Ins. Co., No. 21-CV-0097-WJM-GPG, 2021 WL 4291016 (D. Colo. Sept. 21, 2021).

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