A Video Explaining Pandemic & Direct Physical Damage

Read the full article at https://www.linkedin.com/pulse/need-damage-loss-tangible-property-barry-zalma-esq-cfe and see the full video at https://rumble.com/vpynys-a-video-explaining-pandemic-and-direct-physical-damage.html and at https://youtu.be/G8deTukr-XA and at https://zalma.com/blog plus more than 4000 posts.

The Covid-19 Pandemic has resulted in multiple cases dealing with the need for actual tangible damage. For example, in a Class Action attempt failed for lack of direct physical damage.

Caribe Restaurant & Nightclub, Inc. (“Caribe”) initiated a class action against Defendant Topa Insurance Company (“Topa”) alleging breach of contract and seeking declaratory judgment for insurance coverage.

The USDC ruled on a Covid 19 business interruption claim in Caribe Restaurant & Nightclub, Inc., Individually and On Behalf of All Others Similarly Situated v. Topa Insurance Company, Case No. 2:20-cv-03570-ODW (MRWx), United States District Court Central District of California (April 9, 2021) as have almost every court in the country.

Caribe owned and operated La Luz Ultralounge (“La Luz”), a restaurant and nightclub located in Bonita, California. Caribe purchased an insurance policy (“Policy”) from Topa.

In March 2020, due to the COVID-19 pandemic, the State of California and County of San Diego ordered “the closure of bars” and “bann[ed] onsite dining.” In May 2020, San Diego County “permitted the resumption of onsite dining” subject to restrictions. Caribe alleged that, as a result of these civil authority orders, it was forced to “suspend or reduce business” at La Luz. Caribe also alleges that COVID-19 “impaired Caribe’s property by making it unusable in the way that it had been used before.”

Because Caribe did not allege direct physical loss or damage, its claims were not covered and its causes of action for breach of contract and declaratory judgment fail. Therefore, the Court granted Topa’s Motion to Dismiss without leave to amend.

As sad as the Covid 19 losses are a court has no right to, nor will it, change the wording of the policy. The damage done to Caribe and those similarly situated was done by the state of California. Failing to obtain insurance benefits perhaps some creative lawyer will find a way to sue the state for its wrongful and allegedly unconstitutional orders depriving Caribe of the right to do business.


Although Covid-19 has brought on most of the litigation concerning the requirement for damage to tangible property, this video explains that it has been an issue over many years and has been upheld as a requirement by the courts that have considered the issue. Of course, an insurer could, if it desired, write coverage for damage to intangible property but, if it did, it would find it almost impossible to resolve claims because calculating losses to intangibles is necessarily speculative and difficult to determine with certainty.

© 2021 – Barry Zalma