Arizona Federal Court Concludes That Covid-19 Is Not “Traditional Environmental Pollution”
In a decision that is hardly a finger in the socket, the court in London Bridge Resort LLC v. Ill. Union Ins. Co., No. 20-08109 (D. Ariz. Dec. 4, 2020) held that Covid-19 is not “traditional environmental pollution.”  The issue arose in the context of a coverage grant in a pollution liability policy, but the court’s analysis was based on Arizona case law addressing the pollution exclusion and its breadth: “The Court has little trouble concluding that no plausible interpretation of ‘traditional environmental pollution’ includes a virus outbreak. . . .Plaintiff argues COVID-19 constitutes traditional environmental pollution because different government agencies include ‘virus’ in the definition of certain contaminants and pollutants. However, a virus being considered a ‘contaminant’ or ‘pollutant’ in certain instances does not render a COVID-19 outbreak ‘traditional environmental pollution.’ As the Keggi court explained, ‘[m]any courts that have considered the purpose of the standard pollution exclusion clause have concluded that the clause is intended to preclude coverage for environmental pollution, not for ‘all contact with substances that can be classified as pollutants.’ Furthermore, a virus outbreak does not closely resemble the enumerated examples provided in the Policy's definition.”

Citing Marge Simpson, Court Finds No Coverage For Covid-19 Business Interruption
In Toppers Salon & Health Spa, Inc. v. Travelers Prop. Cas., No. 20-03342 (E.D. Pa. Nov. 30, 2020), the Eastern District of Pennsylvania held that a spa was not entitled to coverage for business income losses on account of Covid-19: the policy’s Virus Exclusion applied and the spa did not sustain physical damage.  In doing so, the court somehow managed to work in a reference to Marge Simpson: “There was a time not so long ago when someone seeking an escape from day-to-day pressures could count on a trip to a spa, like Marge Simpson at Rancho Relaxo. But like so many other things, the Covid-19 pandemic has upended that norm. Like so many other businesses, state and local governments have at times issued orders closing spas to prevent the virus’s spread. Those businesses have, in turn, looked to recoup their losses from insurers. This is one such case.”

Different Choice Of Law Analysis For Bad Faith
When it comes to a choice of law analysis for a coverage dispute, the state where the policy was issued is often a strong factor in the outcome – usually more so than where the claim arose or the underlying litigation is pending.  But, as demonstrated by the court in Charter Realty Group v. James River Ins. Co., No. 20-22768 (S.D. Fla. Oct. 19, 2020), that may not be the case when choice of law is being determined for a bad faith claim.  [In a recent issue of CO I addressed another case that reached this same conclusion].  The Charter Realty Group had this to say about choice of law for bad faith: “However, in bad faith failure to settle claims, the location of the insured risk should be given less weight in the choice of law analysis, and the location of the underlying litigation and the state whose laws were applied should bear heavier consideration. . . . Here, several factors favor applying Florida’s rule. The insured property is in Florida, the tragic shooting occurred in Florida, the settlement on behalf of MPG took place in Florida, the Judgment Creditors are citizens of Florida, and the Underlying Action was litigated in Florida. Critically, because Charter has brought a bad faith failure to settle claim, we give more weight to the fact that the Underlying Action occurred in Florida and applied Florida law.”