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Puma Says 'Deadly' COVID Particles Warrant Coverage

By Amy O'Connor · July 2, 2021, 7:13 PM EDT

Puma is accusing Zurich American Insurance Co. of withholding coverage for its losses after the coronavirus turned the sportswear company's properties into "a gauntlet of deadly particles," according to a suit filed in Illinois federal court on Friday.

The footwear and lifestyle brand says that, under its $343 million all-risk policy, Zurich must cover its financial losses from the COVID-19 pandemic and government shutdown orders that closed its stores and properties, according to the suit.

Puma argued that, while coronavirus particles are not visible, they are still physical objects and are tangible substances that physically alter the air and damage property and surfaces, including stainless steel, wood, paper, plastic, glass ceramic cardboard and cloth — many of which are used in Puma's properties.

Puma called the virus "resilient," because it can survive on surfaces for many days and can compromise or pose a risk of physical damage to structures. The particles also can't be easily wiped away or cleaned off, the company said.

"Between contagious surfaces and invisible particles suspended in the air, the coronavirus turned Puma's properties into a gauntlet of deadly particles," the company said in its filing.

Puma North America, based in Westford, Massachusetts, sells its performance products across the U.S. through hundreds of wholesale accounts and retail stores.

Puma said it has taken many measures to remove the virus from its various properties, including disinfecting, installing plexiglass barriers and providing protective equipment to employees, but "no amount of diligence can actually prevent coronavirus from causing physical damage to surfaces and air within Puma's insured properties."

"The coronavirus and resulting COVID-19 disease cause physical property and physical space within and around properties to lose their functionality and ability to generate revenue causing business interruption and impairment to business income," Puma said.

Many federal and state judges have rejected arguments that the presence of the virus amounts to a direct physical loss or damage, and found that cleaning a property is not repairing damage.

In the past week, a Florida federal judge ruled against Miami oyster bar Mignonette's suit against Tokio Marine Specialty Insurance Co., saying the restaurant did not allege any actual, concrete damage to the property.

Two Oklahoma federal judges sided with Columbia Mutual Insurance on June 29 in a lawsuit brought by a Hampton Inn, saying even if COVID-19 were on the property's premises, it would not mean there was a direct physical loss because its presence could be eliminated by cleaning.

But in another case, an Illinois federal judge ruled that virus-related modifications made to a California salon did amount to a physical loss or damage covered by the insurance policy. Continental Casualty Co., has asked the judge to reconsider his decision, arguing that the salon's adding of a patio and air filtration system are actually business improvements.

Among federal rulings on motions to dismiss COVID-19 coverage suits, more than 80% have been fully dismissed with prejudice in favor of insurers, according to the University of Pennsylvania's COVID Coverage Litigation Tracker.

Many businesses have appealed decisions on whether coverage extends to losses caused by the presence of the coronavirus or government shutdown orders. There are now pending business interruption appeals in 11 federal appellate courts.

The Eighth Circuit issued the first appellate court decision in a COVID-19 business interruption suit on Friday, finding that Cincinnati Insurance Co. didn't have to pay for a dental clinic's losses stemming from coronavirus-related shutdowns.

Zurich declined to comment on pending litigation.

Counsel for Puma declined to comment.

Puma is represented by Robin L. Cohen and Orrie A. Levy of Cohen Ziffer Frenchman & McKenna LLP and Jeffrey M. Hansen and Douglas A. Albritton of Actuate Law LLC.

Counsel information for Zurich American Insurance Co. was not available on Friday.

The case is Puma North America, Inc. v. Zurich American Insurance Co., case number 1:21-cv-03548, in the U.S. District Court for the Northern District of Illinois.

--Additional reporting by Ben Zigterman, Shawn Rice and Daphne Zhang. Editing by Nicole Bleier.

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