By Shawn Rice

Law360 (April 5, 2021, 6:02 PM EDT) -- Factory Mutual Insurance Co. has asked a Connecticut federal judge to toss ITT Inc.'s $750 million coverage suit for business interruption losses, saying cases across the country had shown neither the presence of the coronavirus nor government shutdown orders cause a "physical loss or damage" to property.

The New York-based manufacturer for the aerospace and energy industries can't recover under an all-risk policy, Factory Mutual argued in Friday's motion to dismiss, saying the policy excludes damages for contamination and arising from the policyholder's inability to fully use its property.

"Although the alleged damages to ITT's business are unfortunate, the plain and unambiguous terms of the policy make clear that they are simply not covered by its provisions. Indeed, only two policy coverages (out of the ten identified by ITT) are even potentially applicable to ITT's claims, and both require conditions precedent which ITT has failed to allege," Factory Mutual said.

ITT filed suit in Connecticut federal court in February, saying it was moving its headquarters to that state. ITT alleged that Factory Mutual unreasonably investigated its claim and wrongfully denied coverage in the tens of millions of dollars in losses stemming from the COVID-19 pandemic.

"Numerous ITT facilities have incurred covered losses from or damage to property, time-element losses due to government or private closures or suspensions of business, loss of ingress or egress, losses due to communicable disease, extra expenses, expediting costs and/or logistics costs," according to the suit.

In Friday's motion, Factory Mutual told U.S. District Judge Stefan R. Underhill to reject ITT's contention that the presence of the coronavirus in a person such as an employee is not excluded and is a "physical loss or damage" triggering coverage under eight out of 10 provisions in the policy.

While ITT argued that it "remediated" property, Factory Mutual said the coronavirus can easily be eliminated from surfaces with disinfectants and routine cleaning. Any restrictions to the properties under government orders and extra efforts to keep open did not change the properties, the insurer said.

Factory Mutual also argued that ITT can't escape the contamination exclusion based upon a recent New York federal court decision finding Factual Mutual's exclusion to be ambiguous in a similar suit. That exclusion precludes coverage for "physical loss or damage" due to viruses, the insurer said.

ITT need not show a "physical loss or damage" to be covered for $1 million under the communicable disease provisions, Factory Mutual said. Factory Mutual, however, argued that the insured had not provided the requested documentation necessary to establish the potential coverage.

"Despite the passage of almost nine months since ITT submitted its proof of loss to Factual Mutual, it has yet to identify any evidence regarding the actual presence of COVID-19 at one of its locations, and that information appears nowhere in its complaint, either," the insurance company said.

Factory Mutual is involved with at least 35 suits, according to the most recent data from the University of Pennsylvania Carey Law School. This past month, the insurer was hit with lawsuits from the Philadelphia Eagles, mall owner Taubman Co. LLC and the owners of the National Basketball Association's Sacramento Kings and their arena.

The Eagles organization said Factory Mutual was on the hook for $1 billion in coverage for pandemic-related losses. Taubman said Factory Mutual did not properly investigate whether the coronavirus was present at its mall before denying communicable disease coverage. The Kings organization said it was owed $850 million for losses from having to cancel live entertainment events due to the pandemic.

Steve Zenofsky, a Factory Mutual spokesperson, told Law360 in an email reiterating a statement given in previous litigation involving the insurer that the company "values the long-term relationships we have with our policyholders and we are proud in leading the industry for claims service."

"It is unfortunate when legal matters arise because we strongly believe our insurance policies are clear on the coverage provided," Zenofsky said in the emailed statement on Monday.

Representatives for ITT did not respond to requests for comment.

ITT is represented by Michael C. D'Agostino, Paul A. Zevnik, Gerald P. Konkel and Teri J. Diaz of Morgan Lewis & Bockius LLP.

Factory Mutual is represented by Daniel F. Sullivan and Dana M. Horton of Robinson & Cole LLP; and Harvey Kurzweil, Kelly A. Librera, George E. Mastoris and Kerry C. Donovan of Winston & Strawn LLP.

The case is ITT Inc. v. Factory Mutual Insurance Co., case number 3:21-cv-00156, in the U.S. District Court for the District of Connecticut.

--Additional reporting by Hailey Konnath, Melissa Angell and Dave Simpson. Editing by Peter Rozovsky.

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