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23-P-407 Appeals Court

75 ARLINGTON ST., INC., & others1 vs. STRATHMORE INSURANCE 

COMPANY.

No. 23-P-407.

Suffolk. January 17, 2024. – May 20, 2024.

Present: Meade, Blake, & Desmond, JJ.

Insurance, Business owner's policy, "All risk" policy, Property 

damage, Coverage. Contract, Insurance. Practice, Civil, 

Motion to dismiss. Words, "Direct physical loss of or 

damage to."

Civil action commenced in the Superior Court Department on 

March 11, 2022. 

A motion to dismiss was heard by Kenneth W. Salinger, J. 

Michael S. Levine (Nicholas D. Stellakis also present) for

the plaintiffs.

Gregory P. Varga (Jonathan E. Small also present) for the 

defendant.

Catherine R. Castaldo, for United Policyholders, amicus 

curiae, submitted a brief.

1 202 Washington St., Inc.; 111 South 17th Street, Inc.; One 

Patriot Place LLC; 443 Lexington Avenue, Inc.; 427 Walnut St.,

LLC; 201 Main Street LLC; 151 Granite Street LLC; and 51 Liberty 

Drive, LLC.
2

MEADE, J. The plaintiffs are a group of restaurant owners 

that filed a claim with their insurance company, defendant 

Strathmore Insurance Company (Strathmore), for the loss of 

business income sustained during the COVID-19 pandemic. 

Strathmore denied the claim on the basis that the loss of 

business income was not "caused by direct physical loss of or 

damage to property," as required under the plaintiffs' policy. 

The plaintiffs filed suit, Strathmore moved to dismiss, and a 

Superior Court judge allowed the motion. The plaintiffs appeal 

from the judgment of dismissal.2 Discerning no reason to 

distinguish this case from Verveine Corp. v. Strathmore Ins. 

Co., 489 Mass. 534 (2022) (Verveine), we affirm.

Background. We recite the facts as alleged in the 

plaintiffs' first amended complaint but disregard legal 

conclusions cast in the form of factual allegations. See Moran

v. Benson, 100 Mass. App. Ct. 744, 745 (2022). See also 

Skiffington v. Liberty Mut. Ins. Co., 93 Mass. App. Ct. 1, 2 

(2018).

The plaintiffs had an insurance policy with Strathmore that 

insured against "direct physical loss of or damage to Covered 

Property at the premises described in the Declarations caused by 

or resulting from any Covered Cause of Loss." The premises 

2 We acknowledge the amicus brief submitted by United 

Policyholders.
3

described in the declarations included the plaintiffs' 

headquarters and restaurant locations. "Covered Property" 

included the "building or structure described in the 

Declarations" and personal property "located in or on the 

building . . . or in the open (or in a vehicle) within [one 

hundred] feet of the described premises," subject to certain 

exclusions. A "Business Income (and Extra Expense) Coverage 

Form" included the following provisions pertaining to the loss 

of business income:

"We will pay for the actual loss of Business Income you 

sustain due to the necessary 'suspension' of your 

'operations' during the 'period of restoration.' The 

'suspension' must be caused by direct physical loss of or 

damage to property at premises which are described in the 

Declarations . . . . The loss or damage must be caused by 

or result from a Covered Cause of Loss."

During the policy's term, the COVID-19 pandemic swept the 

globe, and the virus became physically present at the 

plaintiffs' restaurants. As alleged, infected individuals shed 

the virus "through normal breathing, talking, and other ways, 

into the indoor air and onto surfaces throughout the 

restaurants." Once shed, infectious virus particles "settle[d] 

on surfaces, adhering through gravitational and electrostatic 

forces." The presence of the virus caused the plaintiffs to 

take "extraordinary measures," which included "closing certain 

operations and services, substantially modifying others, 

restricting access to many of the properties, enforcing physical 
4

distancing, and undertaking extensive active efforts to repair, 

restore, and remediate the facilities." "Some surfaces and 

objects retain[ed] residual infectious virus even after 

cleaning, and no amount of cleaning [could] prevent aerosolized 

infectious particles from attaching to surfaces after cleaning." 

However, the plaintiffs were able to continue operating "at 

reduced levels" during the COVID-19 pandemic. 

Discussion.3 The Supreme Judicial Court's decision in 

Verveine, 489 Mass. at 536-537, 540, involves similar facts and 

policies. Another group of restaurant owners filed claims with 

the same insurance company, Strathmore, for the loss of business 

income sustained during the COVID-19 pandemic. See id. at 537. 

The restaurant owners had two policies with Strathmore, see id. 

at 536, one of which was the same as the plaintiffs' policy in 

all material respects, see id. at 540. The other policy 

contained a virus exclusion that was not part of the plaintiffs' 

policy.4 See id at 536. However, the Verveine decision does not 

turn on the virus exclusion. Rather, the Supreme Judicial Court 

addressed the same language at issue in this case –- whether 

3 Our review of the allowance of the motion to dismiss is de 

novo. See Verveine, 489 Mass. at 538.

4 The virus exclusion applied to "loss or damage caused by 

or resulting from any virus, bacterium or other microorganism 

that induces or is capable of inducing physical distress, 

illness or disease." Verveine, 489 Mass. at 536.
5

there was any "direct physical loss of or damage to" property --

and concluded that (1) those words require a physical alteration 

of the property and (2) the COVID-19 virus did not physically 

alter or affect any of the insured property. Id. at 542-543.5

In this appeal, the plaintiffs' sole argument is that they, 

unlike the restaurant owners in Verveine, alleged facts showing 

how the COVID-19 virus physically altered or affected their 

insured property. Specifically, the plaintiffs argue that the 

restaurant owners in Verveine had to plead around the virus 

exclusion and "scrupulously avoided pleading any fact or detail 

describing how the virus had any distinct, demonstrable, 

physical effect on their property at all." In other words, the 

plaintiffs argue that Verveine is a "product of the record" and 

should be distinguished on that basis. This argument reads 

Verveine too narrowly.

As noted, Verveine holds that "'direct physical loss of or 

damage to' property requires some 'distinct, demonstrable, 

physical alteration of the property.'" Verveine, 489 Mass. at 

5 The Supreme Judicial Court noted that it did not need to 

reach Strathmore's arguments regarding the virus exclusion given 

that "coverage did not attach in the first place," but briefly 

addressed the exclusion, "not for whether it would exclude 

coverage, but whether, as the [restaurant owners] claim[ed], it 

creates a clear negative implication that policies that do not 

contain the exclusion should cover claims arising from the 

COVID-19 virus." Verveine, 489 Mass. at 545-546. The Supreme 

Judicial Court "conclude[d] that no such negative implication 

[could] or should be drawn." Id. at 546.
6

542, quoting 10A S. Plitt, D. Maldonado, J.D. Rogers, & J.R. 

Plitt, Couch on Insurance 3d § 148:46 (rev. ed. 2016). On the 

question of what constitutes a physical alteration of property, 

Verveine provides the following guidance. "[P]roperty has not 

experienced physical loss or damage in the first place unless 

there needs to be active repair or remediation measures to 

correct the claimed damage or the business must move to a new 

location." Verveine, supra at 543. Thus, the "[e]vanescent 

presence of a harmful airborne substance that will quickly 

dissipate on its own, or surface-level contamination that can be 

removed by simple cleaning, does not physically alter or affect 

property." Id. at 544. In contrast, the "saturation, 

ingraining, or infiltration of a substance into the materials of 

a building or persistent pollution of a premises requiring 

active remediation efforts" does constitute a physical 

alteration. Id.

Similar distinctions have been made in cases across the 

country. See Kim-Chee LLC v. Philadelphia Indem. Ins. Co., 535 

F. Supp. 3d 152, 161 (W.D.N.Y. 2021), aff'd, U.S. Ct. App., No. 

21-1082-cv (2d Cir. Jan. 28, 2022). Courts have ruled that 

"contamination that is temporary . . . or that imposes 

remediation costs without preventing use of the building . . . 

is unlikely to qualify as a direct physical loss [or damage] to 

the insured premises." Id. Courts also have ruled "that 
7

contamination by a persistent chemical or biological agent, not 

otherwise excluded from coverage, may cause . . . direct 

physical loss [or damage] if it renders the insured property 

unusable." Id. Examples of persistent chemical or biological 

agents include ammonia, gasoline, and the persistent odor from 

methamphetamine production. See Verveine, 489 Mass. at 544.

In Verveine, the Supreme Judicial Court applied these 

principles to the COVID-19 virus. The court assumed that the 

virus was physically present in the restaurants but explained, 

"[T]he suspension of business at the restaurants was not in 

any way attributable to a direct physical effect on the 

plaintiffs' property that can be described as loss or 

damage. As demonstrated by the restaurants' continuing 

ability to provide takeout and other services, there were 

not physical effects on the property itself." 

Verveine, 489 Mass. at 543.

The overwhelming majority of courts that have addressed 

insurance claims for pandemic-related loss of business income 

have reached the same conclusion. See Lawrence Gen. Hosp. v. 

Continental Cas. Co., 90 F.4th 593, 603 (1st Cir. 2024). As one 

court phrased it, the presence of the COVID-19 virus "does not 

give rise to the necessary transformative element of something 

like fire, water, or smoke" (quotation and citation omitted). 

Starr Surplus Lines Ins. Co. v. Eighth Judicial Dist. Court of 

the State of Nev., in & for the County of Clark, 535 P.3d 254, 

264 (Nev. 2023).
8

Courts have reached the same conclusion even when presented 

with detailed allegations regarding how the COVID-19 virus 

affects the air and surfaces around it. See, e.g., Lawrence 

Gen. Hosp., 90 F.4th at 600-602, citing Legal Sea Foods, LLC v. 

Strathmore Ins. Co., 36 F.4th 29 (1st Cir. 2022), and SAS Int'l, 

Ltd. v. General Star Indem. Co., 36 F.4th 23 (1st Cir. 2022).

See also Consolidated Restaurant Operations, Inc. v. Westport 

Ins. Corp., ___ N.Y.3d ___ (N.Y. Feb. 15, 2024). For example, 

some policyholders have alleged that aerosol droplets containing 

the virus can linger in the air for hours and that virus 

particles, once on surfaces, can remain there for up to twentyeight days. See Legal Sea Foods, LLC, supra at 35; SAS Int'l, 

Ltd., supra at 27. Other policyholders have alleged that the 

virus bonds to surfaces through a process called "adsorption." 

Lawrence Gen. Hosp., supra at 596. However, these allegations 

do not show the sort of physical alteration required to 

establish coverage. See Verveine, 489 Mass. at 542.

The plaintiffs' factual allegations in this case do not 

compel a different conclusion. The plaintiffs alleged that 

virus particles settled on the plaintiffs' property; the 

plaintiffs had to take "extraordinary measures," including 

cleaning their property, to combat the virus; and that some 

virus particles remained even after cleaning. However, the 

plaintiffs also alleged that, through cleaning and other 
9

measures, the plaintiffs' restaurants remained in use throughout 

the pandemic. The plaintiffs specifically alleged, "[T]here 

have been hundreds (if not thousands) of infected guests on-site 

since the pandemic's outset." These allegations do not show 

that the virus physically altered or affected the insured 

property in any way. Rather, they show the "[e]vanescent 

presence of a harmful airborne substance," Verveine, 489 Mass. 

at 544, and that there was no direct physical loss or damage to 

property.6 Accordingly, the judgment of dismissal is affirmed.

So ordered.

6 We note that the plaintiffs also alleged that the COVID-19 

virus "physically and tangibly change[d], alter[ed], and 

transform[ed] the content of the indoor air and the composition 

of the surfaces throughout the buildings and structures at the 

restaurants." This, however, is a legal conclusion cast as a 

factual allegation, and we therefore do not accept it as true. 

See Moran, 100 Mass. App. Ct. at 745.