Unusual Policy Language Allows NY Botanical Garden’s COVID Claim to Proceed

A New York appellate court on Tuesday handed a rare policyholder win to the New York Botanical Garden for income lost during COVID-19 shutdowns, noting that the disputed policy language did not require physical damage.

The Botanical Garden, a well-known tourist attraction that covers 250 acres in the Bronx, argued that it had purchased broader coverage than provided by the usual commercial property policy. The “blanket pollution legal liability policy” it purchased from Allied World Assurance Co. did not require direct physical loss or damage as a condition for coverage.

The Appellate Division’s First Department affirmed a decision by the Bronx County Supreme Court that denied Allied World’s motions to dismiss the Garden’s breach of contract and bad-faith claims against the insurer.

“The cases relied upon by defendant, which involve civil authority coverage in property liability policies and periods of complete denial of access due to physical damage are inapposite,” the panel’s opinion says. “Defendant also failed to establish that the executive orders denying access were not solely and directly the result of a pollutant at an ‘independent location,’ within the meaning of that term of the policy.”

The majority of state and federal appellate courts that have heard COVID-related business-interruption lawsuits so far ruled that no coverage is owed because there was no physical loss or damage. But the Gardens purchased an unusual policy that did not include the standard language for damages caused by orders from civil authorities.

Tom Baker, a law professor at the University of Pennsylvania who manages a well-known COVID-19 litigation tracker, said his team is aware of no other case that involved the same policy form as the policy purchased by the Botanical Garden.

Allied World acknowledged that COVID-19 is a “pollution incident” under the policy, but argued that Botanical Garden had to lose total access to its property as a condition of coverage.

The insurer also said that the pollution triggering the claim must be at an “independent location” under one of the endorsements contained in the policy. Allied World argued that the state of New York issued executive orders restricting access to businesses for “prophylactic reasons” to slow the spread of the virus. There was not one specific independent location that affected the Botanical Garden property.

Bronx County Justice Eddie J. McShan rejected those arguments, as did the Appellate Division. In an Oct. 15, 2021 order, McShan found that the policy had a broad definition of “independent location” with no “radius clause” that would bar Botanical Garden’s claim.

“Moreover, there is no language at all requiring physical damage to plaintiffs property,” McShan’s order states.

Tred R. Eyerly, a Honolulu, Hawaii attorney who blogged about the Botanical Garden’s win at the trial court level, said he is happy to see an appellate court rule in favor of a policyholder with a COVID-related business interruption claim. He acknowledged, however, that the New York case involves “unusual policy language.”

Eyerly said he has never come across the civil authority language in the Allied World policy in Hawaii.

“I would be surprised that they could anticipate a pandemic, but it sure worked out well for them,” he said.

No decision has been made on the merits of Botanical Garden’s claim. The decision allows the case to proceed toward trial.

Appellate courts in California, Iowa, Wisconsin, Illinois, Indiana, Ohio, New York, Massachusetts, Maryland and Florida have ruled against policyholders seeking coverage for income lost because of COVID shutdowns, as have all 11 regional Circuit Courts of Appeal.

Kevin Haas, an attorney representing Allied World, and John H. Kazanjian, who represents the Botanical Garden, both declined to comment.