As corporate policyholders continue to submit claims to their insurers for business interruption and related losses sustained from the COVID-19 pandemic, insurers appear to be denying such claims routinely where the policies at issue contain exclusionary language specific to viruses — whether in stand-alone virus exclusions or other types of exclusions. As an initial matter, the mere inclusion of the word “virus” in any policy exclusion does not mean that the exclusion applies to COVID-19-related losses. The specific wording of the exclusion and context are critical. This article does not address virus-specific exclusions, but a more detailed discussion of such exclusions can be found here.

But even when the policies at issue do not contain virus-specific exclusions, insurers have looked to other exclusions — including microbe exclusions and pollution exclusions — as bases for denial. This article addresses microbe and pollution exclusions commonly found in commercial property policies, and explores several arguments that policyholders may employ to overcome these denials.

Importantly, the specific wording of these exclusions varies, sometimes significantly, from policy to policy, and even seemingly minor wording differences may have a meaningful impact on the policyholder’s best arguments for overcoming their insurers’ denials. Although we discuss actual exclusionary language excerpted from common policy forms, it is merely illustrative. Careful attention to the specific language of individual policies is required to formulate the policyholder’s most effective arguments for coverage.

The Microbe Exclusion Microbe exclusions typically purport to preclude coverage for loss or damage caused by the presence of microbes or by a governmental order directing a policyholder to remove microbes from its premises. For example, one common form of microbe exclusion provides that “this Policy excludes loss or damage directly or indirectly caused by or resulting from […]:”

Fungi, Wet Rot, Dry Rot and Microbes,

(1) The presence, growth, proliferation, spread or any activity of Fungi, wet rot, dry rot or Microbes, all whether direct or indirect, proximate or remote or in whole or in part caused by, contributed to or aggravated by any physical damage insured by this policy;

(2) Any government or regulatory directive or request that the Insured or anyone acting under the Insured’s direction or control test for, monitor, clean up, remove, contain, treat, detoxify or neutralize any Fungi, wet rot, dry rot or Microbes. “Microbe” is thereafter defined as: “[a]ny non-fungal microorganism or non-fungal, colony-form organism that causes infection or disease.

Microbe includes any spores, mycotoxins, odors, or any other substances, products or byproducts produced by, released by, or arising out of the current or past presence of microbes.”