“Direct Physical Loss” Required to Trigger Coverage for Covid-19 Claims

During the COVID-19 pandemic, widespread government shutdown orders prompted numerous businesses to seek coverage under commercial property and business income insurance policies, leading to extensive litigation over whether such closures constituted a “direct physical loss.” In Sandy Point Dental, PC v. Cincinnati Insurance Co., the Northern District of Illinois held that pandemic-related shutdowns and loss of use, absent tangible physical alteration to property, did not trigger coverage under policies requiring “direct physical loss,” nor did civil authority coverage apply. The court further rejected claims of vexatious conduct and denied reconsideration and leave to amend, reinforcing the prevailing view that COVID-19 and related closure orders do not cause physical loss or damage to insured property.