State Farm Wins Philly Fashion Boutique's Virus Coverage Bid

By Daphne Zhang
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Law360 (May 5, 2021, 8:48 PM EDT) -- A Pennsylvania federal judge on Wednesday freed a State Farm insurance unit from having to pay for a Philadelphia fashion boutique's pandemic-related losses, holding that the retailer failed to allege property damage and that the policy's virus exclusion bars coverage.

U.S. District Judge Nitza Ileana Quiñones Alejandro said the store, a Nicole Miller boutique, failed to show the COVID-19 pandemic and its related government closure orders caused any direct physical loss or damage, a precondition for coverage under the policy, to its insured property. The judge granted State Farm Fire and Casualty Co.'s motion to dismiss.

The definition of direct physical loss does not include "economic impact unaccompanied by a distinct, demonstrable, physical alteration of the property," the judge said, adding that the retailer failed to allege any material and tangible change to the structure of its property.

Specifically, Judge Alejandro said, the store did not point to any loss resulting from an actual contaminant in the air or water but said its loss was caused by government closure orders that caused no damage to its property as required by the policy.

Even if its financial loss were partially caused by the government shutdown order, its claim could be barred by the virus exclusion because its loss would not have happened without the coronavirus and the orders were issued to curb the spread of the pandemic.

The boutique store, a wedding and dress shop in Philadelphia, has argued the policy's virus exclusion is ambiguous and not clearly meant to cover pandemic-related shutdowns because the exclusion did not specifically include the word "pandemic" in it. But Judge Alejandro wasn't persuaded.

"The coronavirus that has caused the COVID-19 pandemic is plainly a virus that induces physical distress, illness, or disease," the judge said. "Though the word 'pandemic' is not used in the policy, there is no reasonable basis to find a 'pandemic exception' within the plain meaning of this express exclusion."

The judge also rebuffed the boutique store's argument that State Farm must be estopped from applying the exclusion because it misrepresented it to regulators in 2006 to hide the true intention of reducing coverage.

Insurers including State Farm clearly said the "the specter of pandemic" led them to propose "an exclusion relating to contamination by disease-causing viruses or bacteria" when they asked regulators to approve the exclusion, so the exclusion was never intended to cover pandemics, Judge Alejandro said.

Counsel for the parties could not be immediately reached for comment. 

State Farm is represented by Nick Cummins and Pamela A. Carlos of Bennett, Bricklin & Saltzburg LLC; Bert Wolff and Douglas Dunham of Dechert LLP.

The boutique is represented by Daniel C. Levin of Levin Sedran & Berman.

The case is Mareik Inc. v. State Farm Fire and Casualty Co., case number 2:20-cv-02744, in the U.S. District Court for the Eastern District of Pennsylvania.

--Editing by Gemma Horowitz.

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Case Title


Case Number



Pennsylvania Eastern

Nature of Suit

Contract: Insurance



Date Filed

June 10, 2020

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