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Most insurance companies will deny business interruption (BI) claims for covid-19 losses by saying there was no “direct physical loss” to insured property. Expect insurance companies to say “Covid-19 did not physically damage your property, so we’re not paying.” Are they right?

Understand that insurance law is state law, so your state law matters. Consider what California law says about “direct physical loss.”

“Direct physical loss” generally means physical damage to insured property. See Simon Marketing v. Gulf  Ins. Co. (2007) 149 CA4th 616, 623. “Direct”, used in conjunction with “physical,” means without intervening conditions, immediate.

A “direct physical loss” should be a distinct, demonstrable, physical altercation to insured property. See MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co. (2010) 187 CA4th 766, 779. Such a loss should result in an actual change in the property from a satisfactory state to an unsatisfactory state. An external force must have acted upon the property to cause a physical change in the condition of the property. MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co. (2010) 187 CA4th. 776, 780.

Can a business demonstrate the presence of covid-19 on its insured property? If so, argue for coverage by showing a distinct, demonstrable, physical altercation to the property caused by the virus. covid-19, after all, physically exists in the environment. It’s an external force.

Did a business’s insured property sustain physical damage because of a lack of power or other utility due to covid-19? If so, argue for coverage by demonstrating that physical damage.

Insurance policies generally don’t define what “direct physical loss” means. Know that any ambiguity in a contract (i.e. an insurance policy) is interpreted against the drafter of the contract (i.e. the insurance company). So argue for coverage on the grounds of ambiguity. Know too that courts sometimes construe insurance policies in favor of coverage. Argue for coverage.

Overcoming the “direct physical loss” hurdle is only the beginning, however. Next steps involve covered perils, exclusions, and endorsements. For more info read our earlier blog: Does Business Interruption Insurance Cover COVID-19?

Have questions? Contact Me for a free consultation.

Evan Walker

Evan W. Walker is a La Jolla attorney who has practiced law since 2008. He has practiced law throughout California, Connecticut, and Louisiana.

Evan worked for and defended insurance companies during the first 7 years of his practice. Since 2015, he has represented people with personal injury and property damage claims and insurance disputes.

Evan’s practice is devoted to serious personal injury claims and catastrophic property damage claims. Areas of focus include security claims against bars and other businesses, government tort claims, fire and flood claims, and inverse condemnation. On behalf of clients, Evan has fought insurance firms, international companies, cities, bars, and casinos.

Evan regularly shares his expertise with other attorneys by teaching courses on insurance and inverse condemnation. He has taught several continuing legal education courses to Attorney Credits, a nationwide CLE company, and ProLawCLE, another nationwide CLE company. He also contributes to various podcasts and publications.


  • Member, State Bar of California
  • Member, San Diego Bar Association
  • Member, Consumer Attorneys of California
  • Member, Consumer Attorneys of San Diego
  • Member, La Jolla Bar Association
  • Member, La Jolla Village Merchants Association
  • Member, San Diego Chamber of Commerce