Tapestry, Inc. v. Factory Mutual Insurance Co.
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The Supreme Court held that when a first-party, all-risk property insurance policy covers "all risks of physical loss or damage" to insured property from any cause unless excluded, coverage is not triggered when a toxic, noxious, or hazardous substance is physically present in the indoor air of that property, adheres to and can later be dislodged from physical items on the property, and causes a loss of the functional use of the property provided that the substance causes neither tangible, concrete, and material harm to the property nor deprivation of possession of the property.
Insurer issued insurance policies to Insured covering policy periods in which Insured's stores were closed in connection with the COVID-19 pandemic. Insured submitted claims to Insurer under the policies for "physical loss or damage" to its covered property exceeding $700 million. Insurer denied the bulk of the claim, leading to this lawsuit. The Supreme Court held the presence of Coronavirus in the air and on surfaces at Insured's properties did not cause "physical loss or damage" as that phrase is used in the policies.
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