A New York appellate court has ruled against several restaurants seeking insurance coverage for losses incurred during the COVID-19 pandemic. The decision affects numerous dining establishments that claimed their insurance policies should cover damages caused by state-mandated restrictions. The ruling highlights the ongoing legal battles between businesses and insurance companies over pandemic-related losses.

The case, Abruzzo Docg, Inc. v. Acceptance Indemnity Insurance Company, was decided on May 6, 2026, by the Appellate Division of the Supreme Court of the State of New York. The court's decision is significant as it clarifies the interpretation of insurance policies regarding physical loss or damage, particularly in the context of the pandemic.

Background

The plaintiffs in this case include Abruzzo Docg, Inc. and several other restaurant and bar owners in New York City. They filed a lawsuit against Acceptance Indemnity Insurance Company and multiple other insurers after their claims for coverage were denied. The plaintiffs argued that they had purchased commercial "all risk" insurance policies that covered "direct physical loss of or damage to" their properties.

During the COVID-19 pandemic, New York's Executive Orders forced these businesses to alter their operations significantly. The plaintiffs claimed these alterations constituted direct physical loss or damage to their properties, which should trigger coverage under their insurance policies. After the lower court dismissed their claims, the plaintiffs appealed the decision.

The Ruling

The Appellate Division ruled that the lower court correctly dismissed the plaintiffs' claims. The court stated, "The amended complaint... failed to allege either a material physical alteration or a complete and persistent dispossession of the properties." The judges emphasized that merely altering business operations or making modifications to comply with health guidelines does not meet the threshold for direct physical loss as defined in the insurance policies.

Judges Colleen D. Duffy, Paul Wooten, Phillip Hom, and Elena Goldberg Velazquez concurred in the decision. They noted that the plaintiffs' claims did not demonstrate the necessary physical loss or damage to qualify for insurance coverage. The court further explained that direct physical loss requires more than impaired functionality; it necessitates a complete dispossession or significant alteration of the property.

Impact

This ruling sets a precedent for similar cases involving businesses seeking insurance coverage for pandemic-related losses. It clarifies that courts will require substantial evidence of physical loss or damage to grant coverage under such policies. Many businesses across New York and beyond may find it challenging to recover losses incurred during the pandemic if their claims do not meet the stringent criteria established by this ruling.

As the legal landscape regarding insurance claims continues to evolve, this decision may influence how future cases are argued and adjudicated. It underscores the importance of understanding the specific terms and conditions of insurance policies, especially in unprecedented situations like a pandemic.

What's Next

The plaintiffs may consider appealing this decision to a higher court, but details about any potential appeal were not available in the court filing. Meanwhile, similar cases involving insurance claims from businesses affected by COVID-19 restrictions are likely to continue as the legal ramifications of the pandemic unfold.