In a significant ruling, the Alaska Supreme Court has unanimously determined that the COVID-19 pandemic does not qualify as physical loss or damage under standard commercial insurance policies.
This decision likely means that businesses in Alaska will not be able to claim insurance coverage for losses related to COVID-19 closures and restrictions.
The court was responding to a certified question from Alaska’s U.S. District Court, which asked whether the presence of COVID-19 or government-mandated restrictions constitute direct physical loss of or damage to property.
Justice Susan Carney, writing for the court, explained that direct physical loss or damage requires a tangible alteration of the property, and the mere presence of COVID-19 on surfaces or government restrictions does not meet this standard.
The case originated when Baxter Senior Living in Anchorage sued Zurich American Insurance after its claim for COVID-19-related losses was denied.
The court’s decision, in line with other rulings across the U.S., has major financial implications.
A ruling in favor of the business could have forced insurers to pay out millions, but the court concluded that without a physical alteration to property, insurance policies do not cover such losses.
The case now returns to federal court for further proceedings.