The COVID-19 pandemic has interrupted supply chains and inevitably resulted in lost profits to various businesses along these chains. As businesses attempt to recover, they may look to their property insurers for compensation. There is uncertainty in the law as to how far typical commercial property insurance policies might stretch to potentially cover such claims.
In the recent decision, MDS Inc. v Factory Mutual Insurance Company (FM Global),1 the Ontario Superior Court of Justice broadly interpreted the term “physical damage” in an all-risk insurance policy to include the “impairment of function or use of tangible property.” It is important to keep in mind that this was decided on unique factual circumstances, with extensive expert evidence. Insurers should view this decision cautiously in light of their own policies’ language and the specific facts resulting in COVID-19-related claims that seek coverage for business losses.