ENVISION HEALTHCARE CORPORATION v. XL INSURANCE AMERICA INC (2024)

Order, Supreme Court, New York County (Andrew Borrok, J.), entered April 26, 2023, which granted defendant's motion to dismiss the complaint, unanimously affirmed, with costs.

The allegations in the amended complaint are not sufficient to state claims for COVID-related “direct physical loss or damage” as that phrase is used in plaintiff's property insurance policy.  Plaintiff failed to properly allege a “direct physical loss” to its property from COVID–19 contamination, which is distinct from a claim for “loss of use,” because the complaint does not allege that the physical contamination at the facilities at issue was a persistent and complete contamination that eliminated the function of the buildings, rendered them uninhabitable, and required their complete shutdown (see Consolidated Rest. Operations, Inc. v. Westport Ins. Corp., 41 N.Y.3d 415, 431, 211 N.Y.S.3d 800, 235 N.E.3d 332 [2024]).  Because we conclude, on this basis, that the policy does not cover plaintiff's direct physical loss of property claims, we do not address whether a direct physical loss claim, like a direct physical damage claim, requires an actual, physical alteration to the property caused by the COVID particles (see id.).

Plaintiff also failed to properly allege “direct physical damage” relating to its medical equipment, supplies, and air ventilation systems.  Consistent with the “[c]ountless decisions across the country [that] have likewise dismissed similar property insurance claims involving allegations that the presence of the coronavirus damaged insured property” (id. at 434, 211 N.Y.S.3d 800, 235 N.E.3d 332), Supreme Court correctly dismissed the amended complaint because it insufficiently alleges how the coronavirus affects and damages the physical integrity of structures or property.  The complaint, as bolstered by the supporting expert affidavit, alleges that COVID droplets absorb into physical surfaces, creating a chemical bond between the viral particles and the surface that alters the chemical composition or physical integrity of a structure, including by increasing its roughness and making it more or less likely to repel water.  However, plaintiff does not allege, and could not plausibly allege, that items such as medical supplies and equipment exposed to COVID contamination require repair or replacement because of changes in their chemical composition (see e.g. Lawrence Gen. Hosp. v. Continental Cas. Co., 90 F.4th 593, 603 [1st Cir.2024];  Tappo of Buffalo, LLC v. Erie Ins. Co., 2020 WL 7867553, *4, 2020 U.S. Dist. LEXIS 245436, *11 [W.D.N.Y. Dec. 29, 2020, 20–CV–754V(Sr)]).

In light of our determination, we do not reach the question of whether the policy exclusions that defendant cites are triggered.

We also decline to grant leave to file a second amended complaint, as an amendment would be futile (see Silverstein v. Pillersdorf, 199 A.D.3d 539, 540, 154 N.Y.S.3d 430 [1st Dept. 2021]).