Burlington Stores Inc. has lost its $750 million lawsuit against Zurich American Insurance Co. over pandemic-related business interruption losses, after a New Jersey federal judge ruled that the retailer failed to meet the policy’s requirement of demonstrating direct physical loss or damage to its property.
In a 15-page decision Tuesday, U.S. District Judge Karen M. Williams dismissed Burlington’s claims with prejudice, finding that the presence of COVID-19 virus particles on surfaces within its stores did not qualify as a physical alteration of property under the terms of the insurance policy.
Court Rejects Burlington’s Argument
Burlington argued that the virus physically altered surfaces and objects, transforming them into “vectors of disease.” However, Judge Williams dismissed this claim as a semantic stretch.
To illustrate her reasoning, Judge Williams compared two door handles: one contaminated with virus particles and one without. She noted that the contaminated handle retained its material, shape, and function, showing no fundamental physical alteration.
Aligning with Nationwide Precedents
Judge Williams’ decision mirrors a wave of rulings favoring insurers in COVID-19 business interruption cases. Central to these cases is the interpretation of the policy phrase “direct physical loss of or damage.”
