The US 3rd District Court of Appeals has dismissed a consolidated appeal, effectively ending a bid by fashion giant Ralph Lauren Corp., luggage manufacturers Tumi Inc. and Samsonite LLC, and Delilah Europe Investments Sarl to recoup billions in losses stemming from the COVID-19 pandemic. The companies had sought to recover damages from Factory Mutual Insurance Co., alleging their losses were covered under their respective property insurance policies.
Ralph Lauren Corp., which alone pursued an estimated $700 million in losses, initially filed its appeal in August 2024. The core of the companies’ argument hinged on the idea that government-mandated closures during the pandemic constituted a “physical loss or damage” to their properties, thereby triggering coverage under their insurance agreements.
However, the appeals court disagreed, ruling that the plaintiffs “failed to allege any physical loss or damages because the properties were intact, functional and not destroyed in ‘whole or in part’,” according to the court’s decision. This crucial distinction proved to be a significant hurdle for the appellants.
Furthermore, the court’s decision highlighted that New Jersey law, which the parties had agreed would govern their cases, specifies that policies covering physical loss or damage do not extend to financial losses incurred due to COVID mandates.
The plaintiffs had also attempted to argue that the presence of the COVID-19 virus on surfaces and in the air within their business premises amounted to a form of physical alteration or destruction. The appeals court, however, rejected this argument, stating that “these technical alterations did not amount to destruction of property or a physical change.”
In a final attempt to bolster their case, the plaintiffs cited FM Global’s internal loss code documents, suggesting these documents supported their interpretation of coverage. The court, however, clarified that New Jersey courts are only permitted to consider “extrinsic evidence”—information external to a contract—when the terms of the agreement are deemed ambiguous. The 3rd Circuit concluded that the terms of FM Global’s policies were “unambiguous,” negating any need to examine evidence outside the policy’s established boundaries.
Factory Mutual Insurance Co. has not commented on the court’s ruling.
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