SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1824-21

AC OCEAN WALK, LLC,

Plaintiff-Respondent,

v.

AMERICAN GUARANTEE

AND LIABILITY INSURANCE

COMPANY, AIG SPECIALTY

INSURANCE COMPANY,

and INTERSTATE FIRE AND

CASUALTY COMPANY,

Defendants-Appellants,

and

NATIONAL FIRE & MARINE

INSURANCE COMPANY,

Defendant.

__________________________

Argued May 9, 2022 – Decided June 23, 2022

Before Judges Sumners, Vernoia and Firko.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the 

internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
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A-1824-21

On appeal from an interlocutory order of the Superior 

Court of New Jersey, Law Division, Atlantic County, 

Docket No. L-0703-21.

David R. Roth (Wiggin & Dana, LLP) of the 

Connecticut and New York bars, admitted pro hac 

vice, argued the cause for appellant American 

Guarantee and Liability Insurance Company (Ford 

Marrin Esposito Witmeyer & Gleser, LLP and Wiggin 

& Dana, LLP, attorneys; Edward M. Pinter, Jon R. 

Grabowski, Caroline McKenna, Jeffrey R. Babbin 

(Wiggin & Dana, LLP), of the Connecticut and 

District of Columbia bars, admitted pro hac vice, and 

David R. Roth, on the briefs).

Keith Moskowitz (Dentons US LLP) of the 

Connecticut, New York, and Illinois bars, admitted 

pro hac vice, argued the cause for appellant AIG 

Specialty Insurance Company (Dentons US LLP, 

attorneys; Shawn L. Kelly, on the brief).

DLA Piper LLP (US), attorneys for appellant 

Interstate Fire & Casualty Company, join in the brief 

of appellant American Guarantee and Liability 

Insurance Company.

Justin F. LaVella (Blank Rome, LLP) of the District of 

Columbia and Virginia bars, admitted pro hac vice,

argued the cause for respondent AC Ocean Walk, LLC 

(Blank Rome, LLP, attorneys; Stephen M. Orlofsky, 

Justin F. LaVella, Alexander H. Berman (Blank Rome, 

LLP) of the Pennsylvania bar, admitted pro hac vice,

Michael A. Iannucci, and Michael R. Darbee, on the 

briefs).

Wystan M. Ackerman (Robinson & Cole, LLP) of the 

Connecticut, Massachusetts, and New York bars, 

admitted pro hac vice, argued the cause for amicus 
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A-1824-21

curiae Insurance Council of New Jersey and American 

Property Casualty Insurance Association (Robinson & 

Cole, LLP, attorneys; Daniel E. Bryer, on the brief).

Paul E. Breene argued the cause for amicus curiae 

United Policyholders (Reed Smith, LLP, Lorelie S. 

Masters (Hunton Andrews Kurth), of the District of 

Columbia, admitted pro hac vice, attorneys; Lorelie 

S. Masters and Kevin V. Small (Hunton Andrews 

Kurth), on the brief).

PER CURIAM

By way of leave to appeal granted, defendant insurance carriers 

American Guarantee and Liability Insurance Company (AGLIC), AIG 

Specialty Insurance Company (AIG), and Interstate Fire and Casualty 

Company (IFCC) (collectively defendants), appeal from a December 22, 2021 

Law Division order denying their motion to dismiss plaintiff AC Ocean Walk 

LLC's (Ocean) complaint.1 Ocean operates the Ocean Casino Resort in 

Atlantic City. In its complaint, Ocean sought property and business 

interruption insurance under defendants' policies for losses of income during 

1

 We granted defendants' motion for leave to appeal on February 22, 2022. In 

addition, we permitted United Policyholders and Insurance Council of New 

Jersey to participate as amicus curiae on behalf of plaintiff Ocean and 

defendants respectively.
4

A-1824-21

closure of its casino pursuant to COVID-19 Executive Orders issued by the 

Governor.

The trial court found Ocean sufficiently pled that COVID-19 caused a 

direct physical loss or damage to its casino to surmount defendants' motion to 

dismiss and the coverage sought by Ocean under various sections of the issued 

policies. The court determined that the contamination exclusion contained in 

the policies did not apply because they were ambiguous.2 For the reasons that 

follow, we reverse.

I.

The following facts are derived from the motion record. Ocean is a 

138,000 square foot casino and gaming entertainment enterprise, the largest 

gaming suite in the United States. Ocean provides overnight accommodations; 

on-site bars, cafes, and restaurants; a nightclub and a beach club; meeting 

spaces; pools; a spa; fitness centers; and an on-site concert venue. The record 

shows Ocean purchased four separate property insurance policies (the policies) 

from defendants and NFMIC "for the express purpose of obtaining broad, 

2

 The trial court granted defendant National Fire and Marine Insurance 

Company's (NFMIC) motion to dismiss based on an endorsement exclusion in 

its policy that was not included in defendants' policies. NFMIC is not 

participating in this appeal.
5

A-1824-21

multi-risk protection for losses that it might incur due to various causes of loss 

or damage to the Ocean."

Collectively, the policies insure Ocean for a cumulative $50,000,000 on 

a "quota share" basis, where several insurers share losses and premiums at 

fixed percentages. Thus, defendants and NFMIC issued their own policy and 

share in the collective $50,000,000 policy limits at varying percentages. Of 

the total $50,000,000 covered, AGLIC agreed to pay fifty percent or up to

$25,000,000; AIG agreed to pay twenty-five percent or up to $12,500,000;

IFCC agreed to pay ten percent or up to $5,000,000; and NFMIC agreed to pay 

fifteen percent or up to $7,5000,000. The policy periods ran from January 4, 

2020, to January 4, 2021.

Although defendants and NFMIC issued separate policies, each "were 

contemporaneously underwritten and contain identical . . . base policy forms." 

Specifically, "the [p]olicies provide numerous independent yet often 

overlapping, coverages that each insure different types of eventualities and are 

separately triggered by different factual circumstances found in [Ocean]'s 

multi-faceted loss." The Insuring Agreement, § 1.01, found in each policy 

states: "This Policy [i]nsures against direct physical loss of or damage caused 

by a Covered Cause of Loss to Covered Property, at an Insured Location . . . 
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A-1824-21

all subject to the terms, conditions and exclusions stated in this Policy." 

(Emphasis added). The policies define "Covered Cause of Loss" as "[a]ll risks 

of direct physical loss of or damage from any cause unless excluded." 

(Emphasis added). However, the policies do not define the term "direct 

physical loss of or damage."

"The [p]olicies also cover certain Time Element losses, i.e., the loss of 

business income resulting from the suspension of [Ocean]'s business activities, 

subject to the [p]olicies' terms and conditions."3 The business interruption 

coverage provisions found in each policy, § 4.01.01, states:

The [Insurer] will pay for the actual Time Element 

loss the Insured sustains, as provided in the Time 

Element Coverages, during the Period of Liability. 

The Time Element loss must result from the necessary 

Suspension of the Insured's business activities at an 

Insured Location. The Suspension must be due to 

direct physical loss of or damage to Property (of the 

type insurable under this Policy other than Finished 

Stock) caused by a Covered Cause of Loss at the 

Location . . . .

[(Second emphasis added).]

Section 7.56.01 of the policies define "suspension" as "[t]he slowdown or 

cessation of the Insured's business activities."

3

 Time Element coverage is frequently referred to as and interchangeable with 

"Business Interruption Coverage."
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A-1824-21

The policies also include various exclusions applicable to all the 

coverage parts within the policies. Relevant to this appeal and common to all 

four insurers is the "Contamination Exclusion." Section 3.03.01 of the policies 

states in pertinent part:

This Policy excludes the following unless it results 

from direct physical loss or damage not excluded by 

this Policy:

Contamination, and any cost due 

to . . . Contamination[,] including the 

inability to use or occupy property or any 

cost of making property safe or suitable 

for use or occupancy, except as provided 

by the Radioactive Contamination 

Coverage of this Policy.

[(First and second emphases added).]

Section 7.09 of the policies defines "contamination" and "contaminated" 

as "[a]ny condition of the property due to the actual presence of any foreign 

substance, impurity, pollutant, hazardous material, poison, toxin, pathogen or 

pathogenic organism, bacteria, virus, disease causing or illness causing agent, 

Fungus, mold or mildew." [(First and second emphases added).] Under 

Section 7.10, contaminants are defined as "[a]ny solid, liquid, gaseous, thermal 

or other irritant, pollutant or contaminant, including but not limited to smoke, 

vapor, soot, fumes, acids, alkalis, chemicals, waste (including materials to be 
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A-1824-21

recycled, reconditioned or reclaimed), asbestos, ammonia, other hazardous 

substances, Fungus or Spores." (Emphases added). Notably, "virus" and 

"pathogen or pathogenic organism" are not included.

"Each of the [p]olicies also contains a number of amendatory 

endorsements, some of which are inconsistent between and among the 

[p]olicies." Unique to NFMIC's policy is its "Biological or Chemical 

Substances Exclusion Endorsement." This exclusion added that NFMIC's 

policy does not provide any coverage for any loss, 

cost, expense or damage of any nature, however 

caused, directly or indirectly arising out of, resulting 

from, or in any way related to the actual or suspected 

presence or threat of any pathogenic or poisonous 

biological or chemical substance or material of any 

kind, including, but not limited to, any malicious use 

of such substance or material, whether isolated or 

wide-spread, regardless of any other cause or event 

contributing at the same time or in any sequence.4

Defendants' policies contain an "Interruption by Communicable Disease" 

(ICB) amendatory endorsement that provide business interruption coverage. 

The endorsement states in pertinent part:

The [defendants] will pay for the actual Gross 

Earnings loss sustained by the Insured, as provided by 

this Policy, resulting from the necessary Suspension of 

4

 The trial court dismissed NFMCI from the action based on this exclusion, 

which is not an issue on appeal.
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A-1824-21

the Insured's business activities at an Insured Location 

if the Suspension is caused by order of an authorized 

governmental agency enforcing any law or ordinance 

regulating communicable diseases and that such 

portions of the location are declared uninhabitable due 

to the threat of the spread of communicable disease, 

prohibiting access to those portions of the Location.

[(Emphases added).]

Defendants' potential responsibility for Ocean's losses under the ICB 

endorsements is their "respective quota share of the losses not to exceed a 

$1,000,000 sublimit of liability."

Of the defendants, IFCC's policy provides a "Pollution Contamination 

Exclusion" endorsement that the trial court found "may not be used to preclude 

coverage." The endorsement states IFCC "will not pay for loss, damage, cost 

or expense caused directly or indirectly by" the "release, migration, discharge, 

escape or dispersal of Contaminants" unless such a peril is affirmatively 

covered by the policy. The endorsement continues to read:

In this exclusion . . . , the capitalized term 

"Contaminants" means materials that may be harmful 

to human health and include any impurity, pollutant, 

poison, toxin, pathogen or pathogenic organism, 

disease-causing or illness-causing agent, asbestos, 

dioxin, polychlorinated biphenyls, agricultural smoke, 

agricultural soot, vapor, fumes, acids, alkalis, bacteria, 

virus, and hazardous substances as listed in the 

Federal Water Pollution Control Act, Clean Air Act, 

Resource Conservation and Recovery Act of 1976, 
10 A-1824-21

Toxic Substances Control Act, or as designated by the 

United States Environmental Protection Agency or 

any other local governmental agency.

[(Emphases added).]

And, AGLIC's policy includes an endorsement titled, "Amendatory 

Endorsement – Louisiana" (Louisiana Endorsement). Relevant to the matter

under review is the portion of the endorsement that deletes and replaces the 

Contamination Exclusion in its entirety with: "Contamination or asbestos, and 

any cost due to Contamination or asbestos including the inability to use or 

occupy property or any cost of making property safe or suitable for use or 

occupancy." The endorsement proceeds to redefine "contamination" as "[a]ny 

condition of property due to the actual presence of any Contaminant(s)." 

"Contaminants" are redefined as "[a]ny solid, liquid, gaseous, thermal or other 

irritant, including but not limited to smoke, vapor, soot, fumes, acids, alkalis, 

chemicals, waste (including materials to be recycled, reconditioned or 

reclaimed), other hazardous substances, Fungus or Spores."

A. COVID-19 Executive Orders

On March 9, 2020, Governor Murphy issued Executive Order (EO) 103 

in response to the outbreak of COVID-19. EO 103 stated COVID-19 was an 

imminent public health hazard and declared a state of emergency in New 
11 A-1824-21

Jersey. EO 103 also stated COVID-19 "is a contagious, and at times fatal, 

respiratory disease caused by the SARS-CoV-2 virus."

On March 11, 2020, the World Health Organization (WHO) declared the 

COVID-19 outbreak a global pandemic. As of March 16, 2020, the Centers 

for Disease Control and Prevention (CDC) had reported that there were more 

than 130,000 cases of COVID-19 worldwide, with more than 4,900 cases in 

the United States. There were 178 positive cases in New Jersey. Based on 

these facts, on March 16, 2020, Governor Murphy issued EO 104, which 

established "social mitigation strategies for combatting COVID-19."

To mitigate the spread of COVID-19 by limiting person-to-person 

interaction, EO 104 designated a subset of businesses within the State as 

"essential" and limited the scope of service and hours of operation for 

restaurants and some retail establishments, all to limit the spread of the 

disease. EO 104 also ordered certain facilities to close and remain closed to 

the public for as long as EO 104 remained in effect effective 8:00 p.m. March 

16, 2020. Among such facilities were "nightclubs," "[c]asino gaming floors, 

including retail sports wagering lounges, and casino concert and entertainment 

venues." However, "[o]nline and mobile sports and casino gaming services 
12 A-1824-21

[were permitted to] continue to be offered notwithstanding the closure of the 

physical facility."

In response to the rising infection rate of COVID-19, the Governor 

issued EO 107 on March 21, 2020. To that end, EO 107 "ordered all nonessential retail businesses in the [S]tate to close and require[ed] individuals in 

the [S]tate to stay at home." EO 107 also required that all brick-and-mortar 

premises of "non-essential" businesses remain closed to the public for as long 

as the order remained in effect. See New Jersey Executive Order No. 107 

(Mar. 21, 2020), https://nj.gov/infobank/eo/056murphy/pdf/EO-107.pdf.

EO 107 also required "[a]ll recreational and entertainment businesses" 

closed to the public, if not already closed pursuant to EO 104. Among this 

non-exhaustive list of such businesses were casino gaming floors, casino 

concert and entertainment venues, and nightclubs. Restaurants and other 

"dining establishments" were "permitted to operate their normal business 

hours," but were "limited to offering only food delivery and/or take-out 

services." EO 107 closed by stating:

It shall be the duty of every person or entity in this 

State or doing business in this State and of the 

members of the governing body and every official, 

employee, or agent of every political subdivision in 

this State and of each member of all other 

governmental bodies, agencies, and authorities in this 
13 A-1824-21

State of any nature whatsoever, to cooperate fully in 

all matters concerning this [EO].

The order took effect on March 21, 2020, at 9:00 p.m.

On June 29, 2020, Governor Murphy rescinded the stay-at-home order, 

but the restrictions on non-essential businesses—like casinos—remained in 

effect. Shortly thereafter, the Governor issued EO 157 on July 2, 2020. EO 

157 permitted limited reopening of specific recreational and entertainment 

businesses, such as casino gaming floors and retail sports wagering lounges, 

subject to restrictions intended to mitigate the spread of COVID-19. See

Executive Order No. 157, Off. Governor (Jul. 2, 2020), 

https://www.nj.gov/infobank/eo/056murphy/pdf/EO-157.pdf.

B. Coverage Issues

Because of EO 104 and the growing risk of COVID-19, Ocean

suspended its casino and entertainment operations on March 16, 2020. Ocean

reopened its casino gaming and waging operations in a restricted fashion 

according to EO 157 on July 2, 2020. Ocean submitted a timely claim under 

the policies to defendants and NFMIC on March 23, 2020. The parties 

corresponded for several months disputing whether coverage was owed or not 

under the policies. On October 2, 2020, defendants agreed to pay their 

proportionate share of a total $850,000 in ICB coverage to Ocean. Ultimately, 
14 A-1824-21

on February 24, 2021, defendants and NFMIC's claims adjuster issued a letter 

denying coverage to Ocean under all provision of the policies, excluding the 

ICB endorsement.

Ocean alleged it was entitled to coverage under the following policy 

sections: Section 3.01 for Property Damage Coverage; Section 4.01 for Time 

Element Coverage; Section 4.02.03 for Extra Expense Coverage; Section 

5.02.03 for Civil or Military Authority Coverage; and Section 5.02.25 for 

Ingress/Egress Coverage. Each of these sections conditions coverage on there 

being direct physical loss or damage.

On March 3, 2021, Ocean filed a complaint alleging that beginning 

March 16, 2020, it incurred "the physical loss of use of its property" and "loss 

of business revenue" "as a result of the risks associated with the [COVID-19]

pandemic, including direct physical loss of or damage to covered property, and 

in compliance with government guidance and orders." Ocean averred that the 

"actual presence" of COVID-19 on the property created "near-certain risk of 

danger and harm to its employees and customers" because of "airborne 

transmission."

Furthermore, Ocean asserted the property became unsafe due to 

respiratory droplets discharged from infected individuals landing on surfaces 
15 A-1824-21

and objects, thus "becoming a part of that surface" and physically changing the 

property. Consequently, Ocean sought damages for breach of contract based 

on the denied coverage following a direct physical loss of or damage to Ocean 

and a declaration of coverage. Defendants moved to dismiss the complaint in 

lieu of filing answers under Rule 4:6-2(e).

First, defendants asserted Ocean failed to and could not allege it 

"suffered direct physical loss or damage to the property, and all of the 

provisions under which [it] seek[s] coverage require[s] direct physical loss or 

damage." The second reason advanced by defendants was "the policies at 

issue contain a contamination exclusion" and "[t]he contamination exclusion 

clearly and unambiguously uses the word 'virus'" in its definition that 

precludes coverage. NFMIC argued independently that its "Biological or 

Chemical Substances Exclusion Endorsement" precluded coverage. On 

December 8, 2021, the trial court heard oral arguments on the motions and 

reserved decision.

On December 22, 2021, the trial court issued a written opinion. The 

court granted NFMIC's motion to dismiss but denied defendants' joint motions

to dismiss the complaint. The court found NFMIC's "Biological or Chemical 

Substance Exclusion Endorsement" precluded coverage because the 
16 A-1824-21

endorsement did not contain language derived from industrial or 

environmental pollution. Instead, "[t]he language substantially mirrors a virus 

such as COVID-19" since COVID-19 is a pathogen.

The court denied defendants' motions on three grounds:

(1) Ocean's claims constituted fact-based pleadings 

under Rule 4:6-2(e) because the pleadings sufficiently 

demonstrated COVID-19 damaged Ocean; 

(2) the phrase "direct physical loss of or damage" in 

the Insuring Agreement was found by the court to be 

ambiguous and "may be satisfied if the property 

becomes unusable for its intended purpose, whether or 

not the property is altered by the COVID-19 virus." 

The trial court examined several New Jersey state and 

federal cases holding a risk that renders an insured 

property unfit for its intended purpose can constitute a 

"direct physical loss or damage" under a policy 

without a physical alteration to the property. Relying 

largely on Wakefern Food Corp. v. Liberty Mutual 

Fire Insurance Co., 406 N.J. Super. 524 (App. Div. 

2009), the trial court concluded plaintiff sufficiently 

pled "a cause of action as to the insuring agreements 

entitling plaintiff to coverage for COVID-19 

damages;" and 

(3) the court held the Contamination Exclusion found 

in defendants' policies did not preclude coverage here

because it related to "traditional environmental and 

industrial damages."

Construing the Contamination Exclusion as a traditional pollution exclusion

clause, the trial court cited Nav-Its, Inc. v. Selective Insurance Co. of America, 
17 A-1824-21

183 N.J. 110 (2005), and concluded "the exclusion remains applicable to more 

traditional environmental-related damages[,] and as such will not fulfill 

[defendants'] reasonable expectations." Furthermore, noting the independent 

definitions of "contamination" and "contaminant," the court held inserting the 

term "virus" in the "contamination" definition "does not change the substance 

of the exemption." The court denied defendants' motions and entered a 

memorializing order.

II.

On appeal, defendants argue that the trial court erred by denying their 

motions to dismiss. They contend COVID-19 did not cause direct physical 

loss of or damage to any of Ocean's covered property as required by the 

policies and Ocean's conclusory complaint is insufficient as a matter of law. 

Defendants also assert the complaint does not allege causation; the trial court 

misapplied the holding in Wakefern and other key decisions; and the 

contamination exclusion bars coverage.

Because this appeal comes to us from the denial of defendants' motion to 

dismiss the complaint for failure to state a claim, we treat Ocean's "version of 
18 A-1824-21

the facts as uncontradicted and accord it all legitimate inferences. We pass no 

judgment on the truth of the facts alleged; we accept them as fact only for the 

purpose of reviewing the motion to dismiss." Banco Popular N. Am. v. Gandi, 

184 N.J. 161, 166 (2005) (citing R. 4:6-2(e)). The critical concern is whether, 

upon review of the complaint, exhibits attached thereto and matters of public 

record, there exists "the fundament of a cause of action"; "the ability of the 

plaintiff to prove its allegations is not at issue." Id. at 183 (citing Printing 

Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989)).

We review a decision denying a motion to dismiss for failure to state a 

claim de novo applying the same standard as the Law Division judge. MasTec 

Renewables Constr. Co. v. SunLight Gen. Mercer Solar, LLC, 462 N.J. Super. 

297, 309 (App. Div. 2020) (citing Castello v. Wohler, 446 N.J. Super. 1, 14 

(App. Div. 2016)). "Moreover, when analyzing pure questions of law raised in 

a dismissal motion, . . . we undertake a de novo review." Smith v. Datla, 451 

N.J. Super. 82, 88 (App. Div. 2017) (citing Royster v. N.J. State Police, 227 

N.J. 482, 493 (2017); Town of Kearny v. Brandt, 214 N.J. 76, 91 (2013)).

Because Rule 4:6-2(e) motions to dismiss "are usually brought at the 

earliest stages of litigation, they should be granted in 'only the rarest 

instances.'" Lieberman v. Port Auth. of N.Y. & N.J., 132 N.J. 76, 79 (1993) 
19 A-1824-21

(quoting Printing Mart, 116 N.J. at 772). Nevertheless, "dismissal is mandated 

where the factual allegations are palpably insufficient to support a claim upon 

which relief can be granted," Rieder v. State, Dep't of Transp., 221 N.J. Super. 

547, 552 (App. Div. 1987), or if "discovery will not give rise to such a claim," 

Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., 

237 N.J. 91, 107 (2019).

Where, as in this case, the issue raised on appeal involves the 

interpretation of a contract and applying case law to the facts, we review the 

trial court's decision de novo. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. 

Cantone Rsch., Inc., 427 N.J. Super. 45, 57 (App. Div. 2012). In doing so, we 

accord no "special deference" to the "trial court's interpretation of the law" or 

its judgment on "the legal consequences that flow from established facts." 

Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 

(1995). Here, the trial court found Ocean suffered a "direct physical loss of or 

damage to" its property as a result of the EO's issued relative to COVID-19 as 

was necessary to trigger coverage for revenue losses under the terms of 

defendants' policies. We disagree.

The insured has the burden "to bring [a] claim within the basic terms of 

[an insurance] policy." Reliance Ins. Co. v. Armstrong World Indus., 292 N.J. 
20 A-1824-21

Super. 365, 377 (App. Div. 1996). There is a "general rule that an insured is 

chargeable with knowledge of the contents of an insurance policy in the 

absence of fraud or inequitable conduct" by the carrier. Edwards v. Prudential 

Prop. & Cas. Co., 357 N.J. Super. 196, 204 (2003). "[I]nsurance purchasers 

are expected to read their policies and 'the law may fairly impose upon [them] 

such restrictions, conditions and limitations as the average insured would 

ascertain from such reading.'" Sears Mortg. Corp. v. Rose, 134 N.J. 326, 348 

(1993) (second alteration in original) (quoting Bauman v. Royal Indem. Co., 

36 N.J. 12, 25 (1961)).

When determining the meaning of an insurance policy provision, a court 

must "first look to the plain meaning of the language at issue." Oxford Realty 

Grp. Cedar v. Travelers Excess & Surplus Lines Co., 229 N.J. 196, 207 (2017). 

As with other types of contracts, the parties' agreement must "be enforced as 

written when its terms are clear in order that the expectations of the parties 

will be fulfilled." Flomerfelt v. Cardiello, 202 N.J. 432, 441 (2010). Thus, in 

the absence of a specific definition in a policy, a word or term "must be 

interpreted in accordance with [its] ordinary, plain and usual meaning." Daus 

v. Marble, 270 N.J. Super. 241, 251 (App. Div. 1994).
21 A-1824-21

"[A] court should not 'engage in a strained construction to support the 

imposition of liability' or write a better policy for the insured than the one 

[they] purchased." Chubb Custom Ins. Co. v. Prudential Ins. Co. of Am., 195 

N.J. 231, 238 (2008) (quoting Progressive Cas. Ins. Co. v. Hurley, 166 N.J. 

260, 272-73 (2001)). Thus, if there is no ambiguity in a policy's terms, those 

terms should be enforced "as written." Zacarias v. Allstate Ins. Co., 168 N.J. 

590, 597 (2001).

In contrast, if a policy's language is ambiguous, the court may utilize 

rules of construction beyond the four corners of the contract. Oxford Realty, 

229 N.J. at 207. For example, courts will ordinarily "construe insurance 

contract ambiguities in favor of the insured via the doctrine of contra 

proferentem." Id. at 208. This doctrine takes into consideration "the vast 

differences in the bargaining positions between an insured and an insurance 

company in the drafting of an insurance policy," allowing a court to interpret a 

contract against the drafter. Villa v. Short, 195 N.J. 15, 23 (2008). 

Additionally, a court may consider the insured's "reasonable expectations." 

Oxford Realty, 229 N.J. at 208. That is, if the "policy's language fairly 

supports two meanings, one that favors the insurer, and the other that favors 
22 A-1824-21

the insured, the policy should be construed to sustain coverage." President v. 

Jenkins, 180 N.J. 550, 563 (2004).

Because insurance policies are very often contracts of adhesion, "courts 

must assume a particularly vigilant role in ensuring their conformity to public 

policy and principles of fairness." Voorhees v. Preferred Mut. Ins. Co., 128 

N.J. 165, 175 (1992). To that end, the above doctrines are intended to protect 

members of the public, who "should not be subjected to technical 

encumbrances or to hidden pitfalls" in insurance contracts. Kievit v. Loyal 

Protective Life Ins. Co., 34 N.J. 475, 482 (1961). The intent is for a policy be 

"construed liberally" in the insured's "favor to the end that coverage is 

afforded 'to the full extent that any fair interpretation will allow.'" Ibid.

(quoting Danek v. Hommer, 28 N.J. Super. 68, 76 (App. Div. 1953)).

However, these doctrines typically should only be utilized by a court to 

"read the policy in favor of the insured" if there is a "genuine ambiguity" in the 

contract, meaning "the phrasing of the policy is so confusing that the average 

policyholder cannot make out the boundaries of coverage." Templo Fuente De 

Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 200 (2016)

(quoting Progressive Cas. Ins., 166 N.J. at 274). A term or phrase in a "policy 

is not ambiguous merely because two conflicting interpretations of it are 
23 A-1824-21

suggested by the litigants." Powell v. Alemaz, Inc., 335 N.J. Super. 33, 44 

(App. Div. 2000).

If the policy's language is "direct and ordinary," can "be understood 

without employing subtle or legalistic distinctions," is not "obscured by fine 

print," and does not "require[] strenuous study to comprehend," it is not 

ambiguous. Zacarias, 168 N.J. at 601; accord Katchen v. Gov't Emps. Ins. Co., 

457 N.J. Super. 600, 606 (App. Div. 2019) (holding while insurer "could have 

included a definition of 'motor vehicle' in its policy," the term was not 

ambiguous simply because a definition was missing, since "[a]ny ordinary 

reasonable person understands" its meaning).

More rarely, an insurance contract may be read in favor of the insured if 

the language at issue is "perhaps not ambiguous," but "nevertheless 

insufficiently clear to justify depriving the insured of [his or] her reasonable 

expectation that coverage would be provided." Sparks v. St. Paul Ins. Co., 100 

N.J. 325, 336 (1985). A court may "examine whether more precise policy 

language, if chosen by the insurance company, would have 'put the matter 

beyond reasonable question.'" Homesite Ins. Co. v. Hindman, 413 N.J. Super.

41, 46 (App. Div. 2010) (quoting Doto v. Russo, 140 N.J. 544, 557 (1995)). 

Nevertheless, in general "the insured's reasonable expectations should not be 
24 A-1824-21

considered where the policy is plain in its meaning unless the policy is 

'inconsistent with public expectations [and] commercially accepted standards.'" 

Nunn v. Franklin Mut. Ins. Co., 274 N.J. Super. 543, 550 (App. Div. 1994)

(alteration in original) (quoting Werner Indus. v. First State Ins. Co., 112 N.J. 

30, 36 (1988)).

Ultimately, the language of an insurance policy "underscores the basic 

notion that the premium paid by the insured does not buy coverage for all . . . 

damage but only for that type of damage provided for in the policy." Weedo v. 

Stone-E-Brick, Inc., 81 N.J. 233, 237 (1979). Thus, a policy may contain 

"limitations on coverage" that "are designed 'to restrict and shape the coverage 

otherwise afforded.'" Hardy ex rel. Dowdell v. Abdul-Matin, 198 N.J. 95, 102 

(2009) (quoting Weedo, 81 N.J. at 237). The doctrines dictating a court 

construe an insurance contract in the insured's favor thus should not be used to 

read into the agreement coverage "which is not there," if there is no showing 

that the policy somehow did not meet the insured's reasonable expectations at 

the time the contract was signed. Werner Indus., 112 N.J. 30 at 38 (quoting 

Tomaiuoli v. U.S. Fidelity & Guar. Co., 75 N.J. Super. 192, 207 (App. Div. 

1962)).
25 A-1824-21

Here, the policies provide that defendants would pay Ocean for business 

income lost because of a suspension in its operations due to a "direct physical 

loss of or damage to" the property caused by a "covered cause of loss." 

"Direct physical loss of or damage to" was not defined in the property 

coverage sections of the policies. Our courts have "adopted a broad notion of 

the term 'physical.'" Phibro Animal Health Corp. v. Nat'l Union Fire Ins. Co., 

446 N.J. Super. 419, 437 (App. Div. 2016). However, when "physical" is 

paired with another word, such as in "physical injury," courts have found that 

the resulting term means a "detrimental alteration," or "damage or harm to the 

physical condition of a thing." Id. at 438 (quoting Farm Bureau Mut. Ins. Co. 

of Am. v. Earthsoils, Inc., 812 N.W.2d 873, 876 (Minn. Ct. App. 2012)). The 

Third Circuit, applying New Jersey law, has also stated that "[i]n ordinary 

parlance and widely accepted definition, physical damage to property means "a 

distinct, demonstrable, and physical alteration" of its structure." Port Auth. of 

N.Y. & N.J. v. Affiliated FM Ins. Co., 311 F.3d 226, 235 (3rd Cir. 2002)

(internal quotation marks omitted) (quoting 10 Couch on Insurance, § 148.46 

(3d ed. 1998)). 

While "[f]ire, water, smoke and impact from another object are typical 

examples of physical damage" that can "demonstrably alter the components of 
26 A-1824-21

a building and trigger coverage" under a property insurance policy, damage to 

a building as an entity "by sources unnoticeable to the naked eye must meet a 

higher threshold." Ibid. For example, in Port Authority, the Third Circuit 

found that the presence of "large quantities of asbestos in the air of a building" 

would "make the structure uninhabitable and unusable" and would therefore 

cause a "physical loss" of property to its owner. Id. at 236. By contrast, if 

asbestos was present but "not in such form or quantity as to make the building 

unusable," there would be no such physical loss since the structure would 

"continue[] to function" without any detrimental change to its "utility." Ibid. 

In Wakefern, the plaintiff, a supermarket, purchased an insurance policy 

providing coverage "for consequential loss or damage resulting from 

interruption of" electrical power at its premises if the interruption resulted 

from "physical damage" to electrical equipment and property located 

elsewhere. 406 N.J. Super. at 531-32. Wakefern filed a claim after a power 

outage at its store occurred when an "electrical 'cascade'" disrupted a large part 

of the nation's power grid. Id. at 532-38. It was determined in some places 

throughout the grid, the cascade damaged power generation and transmission 

equipment, but in other places, power was automatically shut off to protect 

equipment from experiencing power surges that could have caused damage. 
27 A-1824-21

Ibid. The defendant insurance company argued Wakefern was not entitled to 

coverage for economic losses resulting from the power outage, because it had 

not shown any of the power lines or other equipment that supplied its 

supermarket had been physically damaged. Id. at 537-38.

But we disagreed, finding "the undefined term 'physical damage'" in 

Wakefern's policy was "ambiguous" because it was susceptible to "at least two 

different reasonable interpretations": (1) that the part of the grid serving 

Wakefern was not damaged because there was no detrimental alteration to its 

structure; and (2) that the grid was damaged because it was shut down due to 

the cascade elsewhere, rendering it physically incapable of providing 

electricity. Id. at 540-41. We concluded that in the context of the case, the 

term "physical damage" should be construed in Wakefern's favor, since "due to 

a physical incident or series of incidents" elsewhere, the grid as a whole had 

become "physically incapable of performing [its] essential function." Id. at

540. In addition, we explained that the average policyholder should "not be 

expected to understand the arcane functioning of the power grid" when 

submitting an insurance claim after an outage. Id. at 541. However, we stated 

we would have "reach[ed] a different result if, for example, a governmental 
28 A-1824-21

agency had ordered that the power [to the supermarket] be shut off to conserve 

electricity." Id. at 540 n.7.

In reaching our conclusion in Wakefern, we cited cases from this State

and other states wherein coverage was found for a "physical loss of or damage 

to" property based on a "loss of functionality" rather than harm to the 

property's structure. Id. at 542-43. For example, in Customized Distribution 

Services v. Zurich Insurance Co., 373 N.J. Super. 480, 483-84 (App. Div. 

2004), the plaintiff warehouse failed to appropriately store a customer's drink 

products before their expiration, rendering the goods unusable. The customer 

sued plaintiff, who in turn sued the defendant insurer. Ibid. In our opinion, 

we determined "that, for coverage to apply, it was not necessary that the 

product's material or chemical composition be altered" because the bottles 

could have broken thus damaging the property without a change to its chemical 

composition. Id. at 488. Moreover, because the products had expired "as a 

result of an undue passage of time" caused by the plaintiff, the end-consumers' 

perception of the beverages changed, i.e., consumers would not purchase 

expired drinks from the plaintiff's customer. Id. at 490. Because of the 

expiration dates, and the consumers' new perception of the expired drinks, "the 
29 A-1824-21

product lost value as much from the outdating as if it had turned sour or gone 

bad in some more tangible or material way." Ibid.

Other cases from various federal and state courts throughout the country 

have also found insurance coverage in situations involving intangible physical 

damage to property causing a loss of that property's usability. For example, in 

Gregory Packaging, Inc. v. Travelers Property Casualty Co. of America, Civ. 

No. 12-04418, 2014 U.S. Dist. LEXIS 165232, at *13 (D.N.J. Nov. 25, 2014),

the District Court found that "property can sustain physical loss or damage 

without experiencing structural alteration." In that case, the federal court

concluded the plaintiff suffered such a loss when ammonia was inadvertently 

released within its facility, "physically transform[ing] the air" inside and 

rendering it unfit for occupancy until the gas could be dissipated. Id. at *16-

17.

The District Court held the ammonia discharge caused a "direct physical 

loss of or damage to" the facility "because the ammonia physically rendered 

the facility unusable for a period of time." Id. at *17; accord Essex Ins. Co. v. 

BloomSouth Flooring Corp., 562 F.3d 399, 401 (1st Cir. 2009) (physical injury 

to property found where unpleasant odor causing "headaches or other ill 

effects" rendered building unusable); Motorists Mut. Ins. Co. v. Hardinger, 
30 A-1824-21

131 Fed. Appx. 823, 825-27 (3rd Cir. 2005) (direct physical loss found where 

home rendered uninhabitable by bacterial contamination of water supply); 

TRAVCO Ins. Co. v. Ward, 715 F.Supp. 2d 699, 709-10 (E.D. Va. 2010) 

(finding direct physical loss where home rendered uninhabitable by toxic gases 

released by defective drywall), aff'd. 504 F. Appx. 251 (4th Cir. 2013).

By contrast, New Jersey courts have found that losses of business 

income were not covered where the link between the insured premises and 

physical damage to property elsewhere was more attenuated. See, e.g., Arthur 

Andersen LLP v. Fed. Ins. Co., 416 N.J. Super. 334, 349 (App. Div. 2010)

(finding plaintiff's losses following September 11th attacks on the World Trade 

Center and Pentagon were not covered under its insurance policy because no 

evidence supported the property damage at those locations caused any 

interruption of plaintiff's business).

Other federal and state courts throughout the country have reached 

similar conclusions. In Newman Myers Kreines Gross Harris, P.C. v. Great N.

Ins. Co., 17 F. Supp. 3d 323, 325 (S.D.N.Y. 2014), a utility provider shut off 

power to an area of New York City that included the plaintiff's premises in 

advance of Superstorm Sandy's arrival, to prevent greater damage to the 

electrical grid and related equipment. The District Court held the plaintiff's 
31 A-1824-21

loss of income during the outage was not covered by its insurance policy, 

finding that the plaintiff did not suffer "physical loss or damage" to its office, 

but merely a loss of use. Id. at 331; c.f. Wakefern, 406 N.J. Super. at 540 n.7 

(noting the court would not have found a "direct physical loss or damage to" 

insured property if "a governmental agency had ordered that the power be shut 

off to conserve electricity").

The District Court stated the words "direct" and "physical," when used 

to modify the phrase "loss or damage," "ordinarily connote actual, 

demonstrable harm of some form to the premises itself, rather than forced 

closure of the premises for reasons exogenous to the premises themselves, or 

the adverse business consequences that flow from such closure." Great N. Ins. 

Co., 17 F. Supp. 3d at 331. The court found the limitation on coverage in the 

plaintiff's policy to a "period of restoration" lent support to this conclusion, 

stating that "[t]he words 'repair' and 'replace' contemplate physical damage to 

the insured premises as opposed to loss of use of it." Id. at 332.

Addressing the same COVID-19-related issue before this court and 

applying New Jersey law, the United States District Court for the District of 

New Jersey has recently granted several insurance companies' motions to 
32 A-1824-21

dismiss for failure to state a claim under the F.R.C.P. 12(b)(6) standard.

5

 The 

District Court found that insurance policies containing similar, if not identical,

clauses to those in plaintiff's policies here "unambiguously limit[ed]" coverage 

to "physical loss or damage to . . . commercial property." 7th Inning Stretch 

LLC v. Arch Ins. Co., Civ. No: 20-8161, 2021 U.S. Dist. LEXIS 58477, at *4 

(D.N.J. Mar. 26, 2021). And, the District Court has further found this requires 

a showing of tangible damage to property, that the functionality of the property 

was nearly eliminated or destroyed, or that the property was made useless or 

uninhabitable as a result of a covered cause of loss. Id. at *4-5.

The District Court has found that businesses requesting coverage for lost 

income resulting from Governor Murphy's EO's have not made and cannot 

make such a showing because there has been no physical loss of or damage to 

their property, and the presence of COVID-19 virus in the air or on the 

surfaces of their property is insufficient to demonstrate property loss or 

damage. Ibid. (holding it is "not enough" to show the EOs limited access to 

plaintiff's facility without alleging the property was physically damaged); 

5

 The Third Circuit currently has fifty COVID-19 coverage-related appeals 

pending but has yet to render a decision. See Covid Coverage Litigation 

Tracker: Appeals in Business Interruption Cases, PENN LAW, 

https://cclt.law.upenn.edu/appeals/ (last visited June 8, 2022).
33 A-1824-21

accord Emami v. CNA & Transp. Ins. Co., Civ. No. 20-18792, 2021 U.S. Dist. 

LEXIS 60753, at *4 (D.N.J. Mar. 11, 2021); Blvd. Carroll Ent. Grp. v. 

Fireman's Fund Ins. Co., Civ. No. 20-11771, 2020 U.S. Dist. LEXIS 234659, 

at *4 (D.N.J. Dec. 14, 2020); Ralph Lauren Corp. v. Factory Mut. Ins. Co., 

Civ. No. 20-10167, 2021 U.S. Dist. LEXIS 90526, at *6-9 (D.N.J. May 12, 

2021); Child.'s Place, Inc. v. Zurich Am. Ins. Co., Civ. No. 20-7980, 2021 U.S. 

Dist. LEXIS 177269, at *12-18 (D.N.J. Sept. 17, 2021); Manhattan Partners, 

LLC v. Am. Guar. & Liab. Ins. Co., Civ. No. 20-14342, 2021 U.S. Dist. 

LEXIS 50461, *4-6 (D.N.J. Mar. 17, 2021). 

Additionally, an overwhelming majority of federal Circuit Courts have 

similarly held that the mere loss of use of business property caused by the 

presence of COVID-19, and government restrictions in response to COVID-19, 

do not constitute a direct physical loss or damage to property under a 

commercial property insurance policy. See, e.g., 10012 Holdings, Inc. v. 

Sentinel Ins. Co,, 21 F.4th 216, 220-23 (2d Cir. 2021); Uncork & Create LLC 

v. Cincinnati Ins. Co., 27 F.4th 926, 933-34 (4th Cir. 2022); Q Clothier New 

Orleans, L.L.C. v. Twin City Fire Ins. Co., 29 F.4th 252, 259 (5th Cir. 2022); 

Santo's Italian Café LLC v. Acuity Ins. Co., 15 F.4th 398, 401 (6th Cir. 2021); 

Sandy Point Dental, P.C. v. Cincinnati Ins. Co,, 20 F.4th 327, 335 (7th Cir. 
34 A-1824-21

2021); Oral Surgeons, P.C. v. Cincinnati Ins. Co., 2 F.4th 1141, 1144-45, 1145 

n.3 (8th Cir. 2021); Mudpie, Inc. v. Travelers Cas. Ins. Co. of Am., 15 F.4th 

885, 892 (9th Cir. 2021); Goodwill Indus. of Cent. Okla. Inc. v. Phila. Indem. 

Ins. Co., 21 F.4th 704, 710 (10th Cir. 2021); Gilreath Fam. & Cosm. Dentistry, 

Inc. v. Cincinnati Ins. Co., Civ. No. 21-11046, 2021 U.S. App. LEXIS 26196, 

at *2 (11th Cir. Aug. 31, 2021).

Numerous state appellate courts have reached the same conclusion in 

actions involving similar terms and claims. See, e.g., Verveine Corp. v. 

Strathmore Ins. Co., 184 N.E.3d 1266, 1278-79 (Mass. 2022); accord Wakonda 

Club v. Selective Ins. Co. of Am., ___ N.W.2d ___, ___ (Iowa Apr. 22, 2022)

(slip op. at 9-21); Inns-by-the-Sea v. Cal. Mut. Ins. Co., 286 Cal. Rptr. 3d 576, 

593 (Ct. App. 2021); Ind. Repertory Theatre v. Cincinnati Cas. Co., 180 

N.E.3d 403, 410-11 (Ind. Ct. App. 2022); Gavrilides Mgmt. Co., LLC v. Mich. 

Ins. Co., No. 354418, 2022 Mich. App. LEXIS 632, at *6 (Mich. Ct. App. Feb. 

1, 2022).

Here, defendants assert that even if the COVID-19 virus was on the 

surfaces and in the air at Ocean, the property did not sustain any "direct 

physical loss of or damage" sufficient to trigger coverage under the policies. 

Instead, defendants maintain Ocean merely suffered a temporary loss of 
35 A-1824-21

business due to Governor Murphy's EO's without any tangible physical 

alteration to the property.

The term "direct physical loss of or damage to" insured premises was not 

defined in the policies. However, as noted, the lack of a definition does not 

always mean that a term is ambiguous. Katchen, 457 N.J. Super. at 606. 

"Sophisticated commercial insureds[] [like plaintiff] do not receive the benefit 

of having contractual ambiguities construed against the insurer." Oxford 

Realty, 229 N.J. at 208.

The matter under review clearly differs from Wakefern and the other 

cases cited above where insurance coverage was found despite a lack of 

damage to the structure of an insured building. In Wakefern, the plaintiff's 

policy explicitly covered losses of electrical power due to damage to offsite 

equipment owned by others. 406 N.J. Super. at 531-32. We found the policy

included damage anywhere on the greater electrical grid that caused the 

plaintiff's power to be shut off. Id. at 540. In that case, unlike here, there was 

actual physical damage to property, which caused the plaintiff's losses of 

income. In Wakefern, we contrasted the facts with a situation where a 

business's loss of use of its property stemmed from a government order to shut 

off electrical power. Id. at 540 n.7; c.f. Newman Myers, 17 F. Supp. 3d at 330 
36 A-1824-21

(finding loss of income was not a result of direct physical loss or damage to 

property because governmental agency ordered shutting down electrical to 

conserve energy).

Moreover, some of these cases involved intangible damage to premises, 

such as toxic fumes, a landslide, or a noxious odor, that rendered the premises 

physically uninhabitable or unusable for a period of time. Specifically, the 

circumstances in Port Authority and Gregory Packaging differ from those here 

because the respective courts found such large quantities of asbestos and 

ammonia in the air that precluded human occupancy. Consequently, the 

respective properties were stripped of their uses entirely until remediated. Port 

Authority, 311 F.3d at 235-36; Gregory Packaging, slip op. at 16-17. 

Saliently, none of the cases that found coverage due to "loss of use" involved a 

government shutdown in the absence of demonstrable physical damage to 

structures or physical unfitness for human use or habitation.

As defendants argue, and prevalent caselaw maintains, the COVID-19 

virus's presence in Ocean's air and on its surfaces did not physically alter the 

property's physical structure such that it qualifies as a direct physical loss of or 

damage to Ocean's property. Whereas certain quantities of asbestos and 

ammonia in the air require extensive remediation before making a property fit 
37 A-1824-21

for humans, the COVID-19 virus can be eliminated from surfaces with 

household cleaning products and dissipates on its own. See Sandy Point 

Dental, 20 F.4th at 335 (finding COVID-19 "may be wiped off surfaces using 

ordinary cleaning materials, and it disintegrates on its own in a matter of 

days"); Verveine Corp., 184 N.E. 3d at 1276 ("Evanescent presence of a 

harmful airborne substance [like COVID-19] 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."). 

Here, the record supports the conclusion there was no damage to 

equipment or property on- or off-site that caused Ocean to lose its physical 

capacity to operate, and there was no physical alteration that made the casino 

resort too dangerous to enter. Instead, Ocean was forced to close its casino 

gaming floor, sports wagering lounges, and entertainment venues to the public 

in accordance with Governor Murphy's EO's. However, Ocean was able to 

continue operating its restaurants, bars, and hotel accommodations in a 

restricted manner, as well as its online gambling services, from March 16 to 

July 2, 2020. 

Saliently, Ocean would have been able to continue operating its casino 

and performance venue without interruption had the EO's not been issued. As 
38 A-1824-21

Insurance Council argues in its amici brief, COVID-19 did not preclude Ocean

from using its business for all purposes, "and it resumed all activities at its 

premises when government orders allowed it do so, even while the COVID-19 

virus was still circulating." COVID-19 continued to spread, and the risks it 

presented during the government-mandated shutdown remained after EO 107 

was superseded by EO 157 on July 2, 2020.

The trial court and Ocean's reliance on Customized Distribution is also 

misplaced. As an initial matter, Customized Distribution involved a thirdparty liability insurance policy for beverages whereas the policies here are 

first-party property insurance contracts. 373 N.J. Super. at 485-86. We held 

the beverages suffered the functional equivalent of a physical alteration 

sufficient to constitute a physical loss because they had lost all their value to 

the beverage company. Id. at 490-91. The drinks lost their value because they

expired, making them unusable. Ibid. But here, Ocean did not lose its value 

and continued to operate some of its services in a limited fashion during the 

government shutdown, such as on-line betting.

Therefore, even applying a "generous and hospitable approach," Printing 

Mart, 116 N.J. at 746, Ocean's complaint does not allege facts "which, if 

proven, would constitute a valid cause of action" as to afford coverage under 
39 A-1824-21

defendants' policies. Leon v. Rite Aid Corp., 340 N.J. Super. 462, 472 (App. 

Div. 2001). The COVID-19's presence and/or the government-mandated 

shutdown does not constitute a direct physical loss of or damage to Ocean as 

required under the policies. Additionally, because Ocean's claims are based 

solely upon the language of the policies, further discovery would not render 

them viable. Dimitrakopoulos, 237 N.J. at 107-108. Therefore, the trial court 

erred in not granting defendants' motion to dismiss Ocean's complaint under 

Rule 4:6-2(e). In our recent opinion in Mattdogg, Inc. v. Philadelphia 

Indemnity Insurance Co., we considered and extensively addressed these 

identical issues. ___ N.J. Super. ___, ___ (App. Div. 2022) (slip op. at 22-52). 

Our reasoning and holdings in Mattdogg, Inc. apply in the matter under 

review.

III.

Even assuming Ocean successfully pled the COVID-19 virus caused an 

actual or imminent physical loss or damage to Ocean, the Contamination 

Exclusion unambiguously excludes coverage. Defendants assert the trial court 

"violated fundamental rules of insurance-policy interpretation by ignoring the 

plain language of this exclusion and re-writing it to include only traditional 

environmental pollutants." Ocean, however, argues that the court's narrow 
40 A-1824-21

interpretation was appropriate under Nav-Its. The trial court found "it is not 

unreasonable to conclude that pollution exclusions in an all-risk policy that are 

substantially directed at traditional environmental and industrial damaged do 

not pertain to damages for a virus such as COVID-19, which damages are the 

result of naturally occurring communicable diseases." Again, we disagree.

Exclusionary provisions in insurance contracts "are presumptively valid 

and will be given effect if 'specific, plain, clear, prominent, and not contrary to 

public policy.'" Princeton Ins. Co. v. Chunmuang, 151 N.J. 80, 95 (1997) 

(quoting Doto, 140 N.J. at 559). However, "exclusions must be narrowly 

construed," and "the burden is on the insurer to bring the case within the 

exclusion." Ibid. This rule serves the greater doctrine that an "insured is 

entitled to protection to the full extent that any reasonable interpretation of 

[exclusionary clauses] will permit." S.N. Golden Ests., Inc. v. Cont'l Cas. Co., 

293 N.J. Super. 395, 401 (App. Div. 1996) (quoting Ruvolo v. Am. Cas. Co., 

39 N.J. 490, 498 (1963)). 

Nevertheless, "where the words of an exclusionary clause are clear and 

unambiguous, 'a court should not engage in a strained construction to support 

the imposition of liability.'" Aviation Charters v. Avemco Ins. Co., 335 N.J. 

Super. 591, 594 (App. Div. 2000) (quoting Longobardi v. Chubb Ins. Co. of 
41 A-1824-21

N.J., 121 N.J. 530, 537 (1990)). "[W]hile where there are several 

interpretations of an exclusion's meaning" a court "would tend to favor the one 

for coverage," however, this does not mean "that any far-fetched interpretation 

of a policy exclusion will be sufficient to create an ambiguity requiring 

coverage." Id. at 59-95 (second and third alterations in original) (quoting 

Stafford v. T.H.E. Ins. Co., 309 N.J. Super. 97, 105 (App. Div. 1998)). This is 

because "clear, unambiguous exclusionary clauses . . . . directly affect the risk 

the insurer assumes and upon which premiums are established." Id. at 596.

Here, the Contamination Exclusion unambiguously excludes coverage 

for "[c]ontamination, and any cost due to [c]ontamination including the 

inability to use or occupy property or any cost of making property safe or 

suitable for use or occupancy." The policies further define "contamination" 

unambiguously as "[a]ny condition of property due to the actual presence of 

any . . . pathogen or pathogenic organism, bacteria, [or] virus." 

Unquestionably, this would encompass the COVID-19 virus. Moreover, 

Ocean alleged in its complaint the COVID-19 virus was actually present at 

Ocean and caused it to incur losses. And, because Governor Murphy issued 

the EO's to mitigate the spread of this highly contagious virus, as pled by 
42 A-1824-21

Ocean, the relief it seeks is inexplicably intertwined to the presence of the 

virus and is excluded under the policy.

"[W]here the words of an exclusionary clause are clear and 

unambiguous," as they are here, "a court should not engage in a strained 

construction to support the imposition of liability." Aviation Charters, 335 

N.J. Super. at 594 (quoting Longobardi, 121 N.J. at 537). Furthermore, 

Ocean's complaint also confirms COVID-19 "is a highly contagious and easily 

transmitted human pathogen," thus excluding coverage under the 

Contamination Exclusion.6

Additionally, the definition of "contaminant" in the policies does not 

include the term virus. However, the term "contaminant" is not used or 

referred to in the Contamination Exclusion or definition of "contamination." 

Instead, the word "contaminant" is used in the base policies only in special 

coverages for environmental cleanup costs unrelated to the Contamination 

Exclusion. Nonetheless, the Pollution Contamination Exclusion endorsement 

in IFCC's policy, unique to IFCC, states IFCC "will not pay for loss, damage, 

6

 "SARS-CoV-2, the coronavirus that causes COVID-19, is a pathogenic 

virus." See Coronavirus: What is an emerging viral pathogen claim?, EPA, 

https://www.epa.gov/coronavirus/what-emerging-viral-pathogen-claim (last 

updated Apr. 11, 2022).
43 A-1824-21

cost or expense caused directly or indirectly by" the "release, migration, 

discharge, escape or dispersal of [c]ontaminants." The endorsement continues 

to include "virus" in its definition of contaminants.

In an attempt to reconcile the differences between these definitions, the 

trial court erroneously found them ambiguous and confusing. Relying on NavIts, the court held those "pollution exclusions are overly broad[] [and] unfair." 

In applying Nav-Its, the court concluded "the contaminants are associated with 

traditional environmental pollution damages, not reasonably related to the 

damages in this case, which are derived from a communicable disease." 

However, the court erred by conflating the applicability of terms used in the 

general Contamination Exclusion found in all the policies, and the Pollution 

Contamination Exclusion endorsement, along with its specific terms and 

definitions, only found in IFCC's policy.

Nonetheless, grouping viruses with environmental and industrial 

pollutants may be unusual, but Ocean does not cite any controlling cases 

construing "contamination" in its contractual definition. A court may not 

interpret an insurance contract in a way that leaves part of the contract 

meaningless. Cypress Point Condo. Ass'n v. Adria Towers, L.L.C., 226 N.J. 
44 A-1824-21

403, 416 (2016). We conclude it was improper for the trial court to essentially 

rewrite the unambiguous and applicable Contamination Exclusion at issue.

Lastly, although not addressed in the trial court's decision, Ocean argued 

in opposition to defendants' motion to leave for appeal, and reiterates again on 

appeal, that the Contamination Exclusion does not bar coverage because the 

Louisiana Endorsement AGLIC included in its policy "deleted and replaced" 

the Contamination Exclusion and contamination definition. The endorsement 

defines "contamination" as "the actual presence of any [c]ontaminant(s)" and 

removes "pollutants or contaminant" from the definition of "contaminant."

Defendants argue this is a state-specific endorsement applicable only to 

Ocean's property under its contract located in Louisiana. However, Ocean 

asserts this endorsement also applies in New Jersey. As mentioned, the 

endorsement is titled "Amendatory Endorsement – Louisiana." Ocean 

highlights the difference in prefatory language in the Louisiana Endorsement, 

"THIS ENDORSEMENT CHANGES THE POLICY," versus the language in 

the Connecticut Endorsement,7 which states "THIS ENDORSEMENT 

CHANGES THE POLICY AND APPLIES TO THOSE RISKS IN 

7

 The relevant endorsement is similarly titled, "Amendatory Endorsement –

Connecticut" (Connecticut Endorsement).
45 A-1824-21

CONNECTICUT." Ocean argues this difference in language demonstrates 

AGLIC's intent to make the Louisiana endorsement a generally applicable 

endorsement. Notably, in addition to the Connecticut Endorsement, the New 

York Endorsement8is the only other amendatory endorsement to use the same 

prefatory language. The remaining twenty-nine of thirty-one state-titled 

amendatory endorsements use the same general prefatory language found in 

the Louisiana Endorsement.

Applying Ocean's analysis, several state-titled endorsements present 

conflicting amendments to various sections. For example, multiple 

endorsements delete and replace "SECTION VI-GENERAL POLICY 

CONDITIONS, CANCELLATIONS/NON-RENEWAL" in its entirety, 

including the Louisiana Endorsement. However, some endorsements present 

different and conflicting replacement terms from each other despite using the 

same general prefatory language found in the Louisiana Endorsement that 

Ocean relies on.

8

 The relevant endorsement is similarly titled, "Amendatory Endorsement –

New York" (New York Endorsement). The endorsement precedes with "THIS 

ENDORSEMENT CHANGES THE POLICY AND APPLIES TO THOSE 

RISKS IN NEW YORK."
46 A-1824-21

Had AGLIC intended for state-titled endorsements using the general 

prefatory language to ignore geographical boundaries, then it would not put 

forth geographic identifiers with conflicting terms between endorsements 

unless the endorsements were meant to be state-specific. See Couch on 

Insurance § 18:20 ("[T]he policy [and its endorsements] must be considered as 

a whole and the caption read in connection with the remainder of the 

contents."). Because a court may not interpret an insurance contract in a way 

that leaves part of the contract meaningless, we reject plaintiff's claim the 

Louisiana Endorsement applies to the Contamination Exclusion because it 

would render the geographic identifier of all the state-titled endorsements 

meaningless. Cypress Point Condo., 226 N.J. at 416.

The Federal District Court of New Jersey, among other courts, have 

faced the same dilemma in COVID-19 insurance actions involving identical 

language and have held the Louisiana Endorsement amending the 

Contamination Exclusion is state-specific to Louisiana. See, e.g., Manhattan 

Partners, slip op. at 6 n.3. ("Had the parties intended to remove 'virus' from the 

Contamination provision, they could have done so with a general endorsement 

that was not limited to a single state.") We agree and reject Ocean's argument. 

We conclude Ocean's remaining arguments—to the extent we have not 
47 A-1824-21

addressed them—lack sufficient merit to warrant any further discussion in a 

written opinion. R. 2:11-3(e)(1)(E).

For these reasons, we reverse the matter under review. The matter is 

remanded to the Law Division for entry of an order dismissing Ocean's 

complaint as to all defendants.

Reversed and remanded. We do not retain jurisdiction.