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Purdue University is not entitled to compensation under a COVID-19 related insurance claim for lost income, the Indiana Court of Appeals affirmed in a unanimous ruling Wednesday.
According to court records, Purdue University purchased a commercial insurance policy from New York-based American Home Assurance Co., with an effective date of Sept. 30, 2017, through Sept. 30, 2020, insuring Purdue’s real and personal property not subject to exclusions.
In March 2020, Gov. Eric Holcomb issued Executive Order 20- 02 declaring COVID-19 a disaster emergency for the state.
Holcomb also issued Executive Order 20-08, which closed all non-essential businesses and ordered persons living in Indiana to stay at home through at least April 6, 2020, with some limited exceptions.
The stay-at-home order was subsequently extended.
On April 6, Purdue filed a claim with American Home for loss of income during a business interruption, identifying its date of loss as March 23, 2020.
Purdue’s claimed losses included those stemming from cancellation of athletic events and conferences, lower rates of housing and campus hotel occupancy, and decreased sales of food, retail items, and health services.
American Home did not pay the claim but rather issued a reservation of rights letter, identifying two potential bases for non-payment:
- “The insuring agreement for business interruption requires that the interruption of your business be the result of direct physical damage by a covered cause of loss. There is no claim of direct physical damage.”
- “Additionally, the COVID-19 virus is considered a contaminant or pollutant and may be specifically excluded by the policy.”
On Aug. 17, 2021, Purdue filed a complaint for a declaratory judgment against American Home, which American Home moved to dismiss.
Purdue later filed its first amended complaint, seeking a declaration that Purdue’s losses are covered under the terms of the policy and requesting an order for the payment of such losses.
American Home filed its motion to dismiss the amended complaint.
The Allen Superior Court conducted a hearing on the pending motion to dismiss and advised the parties that the motion would be treated as a motion for summary judgment due to the filing of materials outside the pleadings.
The trial court issued its summary judgment order in favor of American Home.
Purdue appealed.
The university argued the trial court erroneously construed the policy at issue to require a physical alteration of real property for coverage and the order foreclosed Purdue’s opportunity to show that some of its facilities were uninhabitable.
The Court of Appeals affirmed, finding the trial court did not err in granting summary judgment in favor of American Home.
Judge L. Mark Bailey wrote the opinion for the appellate court.
Bailey noted that when the parties then presented arguments to the trial court, they primarily focused upon two Court of Appeals’ decisions regarding claimed business-income insurance coverage for COVID-19 related losses: Ind. Repertory Theatre v. Cincinnati Cas., 180 N.E.3d 403 (Ind. Ct. App. 2022), trans. denied, (“IRT I”) and Ind. Repertory Theatre v. Cincinnati Cas., 203 N.E.3d 555 (Ind. Ct. App. 2023), trans. denied, (“IRT II”).
The appellate judge wrote that Purdue claimed that it procured an “all risk” policy from American Home not excluding COVID-19.
“An ‘all risk’ policy is one which provides coverage ‘for all fortuitous losses in the absence of fraud or misconduct of the insured, unless the policy contains a specific provision expressly excluding the loss from coverage,’” Bailey wrote, citing Associated Aviation Underwriters v. George Koch Sons, Inc., 712 N.E.2d 1071, 1073 (Ind. Ct. App. 1999), trans. denied.
But Purdue experienced no covered loss, Bailey wrote, because COVID does not cause “direct physical loss or damage.”
Bailey wrote that the policy is not ambiguous, and the trial court did not err in applying the law to the claim for a declaratory judgment.
“Because Purdue’s claim does not fall within the coverage of the Policy for physical property loss or damage, we need not address the alternative argument that the claim would fall within the pollution and contamination exclusion of the Policy,” Bailey concluded.
Judges Terry Crone and Rudolph Pyle concurred.
The case is The Trustees of Purdue University v. American Home Assurance Company, 23A-PL-1413.
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