Indiana Federal Court Rejects Policyholder’s COVID Claim Alleging “Chemical Alteration” of Property

Foran Glennon shareholders Matthew Ponzi and John Eggum, and associate M. Patrick O’Neal, obtained a final judgment dismissing, with prejudice, a case in which a policyholder argued that COVID-19 caused physical loss or damage because, allegedly, COVID-19 caused a “chemical alteration” of its property.

The lawsuit, heard in the United States District Court for the Southern District of Indiana, Indianapolis Division, involved a dental practice that brought a claim under its insurance policy following the COVID-19 pandemic.  The suit was filed after many other lawsuits were dismissed for failure to state a claim, and in an effort to differentiate its claims from those other (unrelated but similar) matters, the policyholder alleged that the COVID-19 virus:

  • “physically and chemically alters the composition of many common surfaces,” as the virus “adsorbs” onto the surface through “intermolecular electric interactions”; and
  • “physically and chemically alters the air within a building or structure”

Notably, “adsorb” is a chemical process that is different that “absorb”/“absorption.”

The dental group contended these claims were sufficient to “plausibly allege … a ‘physical alteration’ of its property, and/or a ‘physical contamination’ on its property.”

The court, referencing the Indiana Court of Appeals’ decision in Indiana Repertory Theatre, Inc. v. Cincinnati Cas. Co. (IRT II), rejected this argument.  It found that the dental practice’s physical-alteration argument—both for surfaces and air—was properly rejected for the same reasons as it was rejected in Indiana Repertory –regardless of whether the virus particles bind to surfaces, this does “not amount to physical alteration of the air and surfaces.”  No amount of scientific declarations or physics-based allegations could change the fact that the policyholder had simply failed to plausibly allege physical loss or damage within the meaning of the insurance policy at issue.

This case was covered in Law360 (subscription required).

Matt concentrates his practice in insurance coverage and commercial litigation, specifically in the analysis and litigation of commercial property, liability and reinsurance claims. Clients trust his extensive trial experience at both the federal and state level when faced with challenging litigation matters.

John litigates property insurance claims around the country, including in lawsuits where bad faith and claim handling disputes are at issue. He is a frequent speaker at insurance industry events, including on topics of appraisal, causation and claim handling practices. He’s been recognized by various organizations for his work and leadership in the legal and insurance industries, including by The American Lawyer, which named him a Midwest Trailblazer, the Illinois Association of Defense Trial Lawyers, the Chicago Daily Law Bulletin and Chicago Lawyer, Super Lawyers and Leading Lawyers. 

Patrick concentrates his practice on insurance coverage and bad faith litigation. He has experience in civil litigation and insurance defense with a focus on product liability, professional liability, errors and omissions and subrogation matters.

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