Mars Loses Appeal to Undo Dismissal of COVID-19 Business Loss Claims

Petcare, food and candy company Mars Inc. has lost its bid to revive its claims against Factory Mutual Insurance Co. for business interruption losses it incurred during the coronavirus pandemic.

The Fourth Circuit Court of Appeals last week upheld the dismissal of the claims by a federal court in Alexandria, Virginia in October 2022 on the grounds that Mars did not suffer the required direct physical loss and damage from the COVID-19 virus as claimed. Factory Mutual had issued $5 billion in insurance coverage to Mars.

The appeals panel also upheld the denial of a request by Mars to certify the coverage question to the Virginia Supreme Court.

Mars had asked the court to consider the Vermont Supreme Court opinion in September 2022 that revived a case in which a shipbuilder claimed that the COVID-19 virus “adheres” to surfaces, thereby triggering business interruption coverage. The Vermont Supreme Court remanded the case back to the trial court on the finding that the shipbuilder had met the state’s low hurdle for pleadings and should be heard.

(Vermont’s is the only high court to side with an insured in such cases. The Vermont case is scheduled to be heard by the trial court on May 31.)

Mars had similarly but unsuccessfully claimed that statistical modeling confirmed to a “high degree of certainty” that COVID-19 was present in or around its commercial and industrial properties generally and was being “continuously introduced, dispersed, and reintroduced into and altering the air and on surfaces of property” in or around Mars’ locations.

Factory Mutual argued that the Virginia Supreme Court, the Fourth Circuit Court and the majority of other courts have rejected the theory that the coronavirus causes physical loss or damage.

The Circuit Court of Appeals upheld the dismissal of the insurance claims and the denial of the request for certify the coverage question to the Virginia high court without oral argument “because the facts and legal contentions are adequately presented in the materials before this court and argument would not aid the decisional process.”