Immediately following the initial outbreak of COVID-19, several
insurance companies publicly declared that policyholders are not
entitled to business interruption coverage if their property
policies contain a virus exclusion. As a result, many policyholders
have been discouraged by a virus exclusion in their property
policies. The virus exclusion, however, may not be dispositive. In
fact, for purposes of exclusions in property policies, New Jersey
has adopted the efficient proximate cause doctrine. This doctrine
states that the cause of a loss is either the first precipitating
event or the final damage-inducing act. Applying this doctrine,
policyholders have argued that while the precipitating cause of
their loss may have been the coronavirus, the final act causing
loss was the governmental order that closed down their businesses.
Since the government order is the efficient proximate cause of the
loss, the virus exclusion should not apply.
