Baxter Senior Living, LLC v. Zurich American Insurance Company

Summary

The Alaska Supreme Court answered two certified questions from the federal district court, holding that neither the presence of COVID-19 at an insured property nor pandemic-related governmental operating restrictions constitutes "direct physical loss of or damage to" property under a commercial insurance policy. The court interpreted "direct physical loss" to require physical alteration or deprivation of possession and "direct physical damage" to require physical alteration, concluding that temporary loss of use and virus particles that merely attach to property do not satisfy those requirements. The court also determined that the policy's other provisions, including its microorganism exclusion and restoration provisions, supported that interpretation.