Litigation
Judge Rules Against AECOM in COVID-19 Property Damage Claim
AECOM this month struck out on most of its initial lawsuit to collect on COVID-19-related property damage insurance claims from Zurich America Insurance Co.
Filed last year in federal district court in Pasadena, Calif., AECOM's lawsuit is based on an all-risk policy that provided $250 million in coverage per cause with various sub-limits. It covered "all risks of direct physical loss or damage" for any cause not excluded. Except for exclusions, all-risk policies are broader in what they cover than named peril policies, which are restricted to specific causes.
The complaint from AECOM alleges that Zurich's supervisor for international property claims denied coverage and told AECOM that the presence of COVID-19 in a building or on a surface does not constitute physical loss or damage covered by the policy.
"The contamination exclusion plainly bars plaintiff's claims and the Louisiana endorsement does not apply to the losses the plaintiff alleged because none of those allegations concern property located in Louisiana."
—Judge John A. Kronstadt. U.S. Disrict Court, Pasadena, Calif.
Many similar lawsuits around the country have also failed, running into the roadblock of virus-specific exclusions. Nevertheless, AECOM began an appeal on Jan. 19.
Judge John A. Kronstadt on Jan. 13 dismissed all but a portion of AECOM's lawsuit, stating that with the exception of Louisiana, the property insurance policies it had from Zurich do not cover COVID-19.
"The contamination exclusion plainly bars plaintiff's claims," Kronstadt wrote, "and the Louisiana endorsement does not apply to the losses the plaintiff alleged because none of those allegations concern property located in Louisiana."
Among a series of state-specific endorsements made to the various coverages purchased by AECOM was one that in Louisiana replaced the usual exclusion of contaminants. Instead, the policies had an exclusion of "any solid, liquid, gaseous, thermal or other irritant, including, but not limited to, smoke, vapor soot, fumes, acids, alkalis, chemicals, fungus or spores."
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The Louisiana endorsement eliminated reference to virus or disease in the definition, Kronstadt wrote.
But the judge ruled that none of the allegations applied to properties in Louisiana and he allowed AECOM to amend its complaint if it found such Louisiana losses.
AECOM had claimed that its losses came as a result of having to shut down some of its 800 offices and construction sites globally because of the virus. More than 650 projects were closed in May, 2020, and at least 500 employees have been infected, the firm claimed.
