By Shawn Rice

Law360 (April 14, 2021, 6:46 PM EDT) -- Western Union Co. isn't covered for business losses from closing its agent locations under government orders tied to the COVID-19 pandemic, a Chubb unit argued in Colorado federal court, saying the financial services company didn't suffer a physical loss or damage to its property.

ACE American Insurance Co., in Tuesday's motion, said the issue of "direct physical loss, damage or destruction" to property in the context of the COVID-19 closure orders hasn't been considered by a Colorado federal court or the Tenth Circuit. But the Chubb unit argued Western Union's suit should be tossed, saying the company's financial losses can't be shifted onto the $100 million policy.

"The COVID-19 pandemic does not provide a basis to discard well-established rules of contractual interpretation or to rewrite insurance contracts to impose financial obligations insurers never agreed to undertake," ACE said, asking the District of Colorado to follow dozens of courts across the country and hold pandemic-related losses aren't covered without any physical loss or damage.

Western Union filed suit in January, claiming a number of its locations closed during the spread of the COVID-19 pandemic. As a result of the shutdown, Western Union was dealt losses in its consumer-to-consumer money transfer service as well as in education-related payments services, according to the suit.

In Tuesday's motion, ACE asked that the breach of contract and bad faith suit be dismissed, saying there wasn't any physical loss or damage to Western Union's locations triggering coverage. The insurer said it expects Western Union to rely on a 1968 Colorado Supreme Court case to help decide the issue.

The Colorado Supreme Court in Western Fire Insurance Co. v. First Presbyterian Church ruled a church's closure due to gasoline accumulation on its property was a physical loss under the church's policy. But ACE said the coronavirus didn't actually infiltrate Western Union's premises to prompt the closure.

"The governmental orders requiring certain categories of businesses to close or limit their operations to proactively limit the spread of COVID-19 are not the equivalent of an order to close one specific location, reactively to remedy a situation such as gasoline saturation or a fire burning a restaurant's kitchen," the insurer said.

The Chubb unit also argued coverage was barred under pollution and contamination exclusions.

"The definition of contaminant or pollutant clearly and unambiguously includes viruses, such as COVID-19. For that reason, there can be no doubt that the exclusion applies notwithstanding its stylization as a 'pollution and contamination exclusion' rather than as a 'virus exclusion,'" the insurer added.

ACE has been fighting similar business interruption suits across the country in the wake of pandemic-related losses to industries being forced to temporarily close under government orders.

An operator of 40 hotels, including Marriott and Fairfield Inn properties, said in a Pennsylvania state suit that ACE and eight other insurers are on the hook for $125 million in coverage. Caesars Entertainment Inc. hit 36 insurers, including the Chubb unit, with a Nevada state suit alleging $2 billion in coverage is owed. Finally, ACE is defending against a Minnesota health care system's $59 million suit.

Representatives for the parties didn't respond to requests for comment on Wednesday.

Western Union is represented by Kevin McAdam of Holland & Hart LLP and by John W. Schryber and Andrew M. Weiner of Reed Smith LLP.

ACE is represented by Amy M. Samberg and Tamara C. Jordan of Foran Glennon Palandech Ponzi & Rudloff PC.

The case is The Western Union Co. v. ACE American Insurance Co., case number 1:21-cv-00127, in the U.S. District Court for the District of Colorado.

--Additional reporting by Hailey Konnath and Daphne Zhang. Editing by Leah Bennett.

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