In an unusual move for a federal district court handling COVID-19 claims, a certified question was submitted to the Maryland Court of Appeals for an interpretation of state law. Tapestry, Inc. v. Factor Mut. Ins. Co., 2022 U.S. Dist. LEXIS 75665 (D. Md. April 25, 2022).
Tapestry owned three luxury accessory lifestyle brands: Coach, kate spade new york, and Stuart Weitzman. Before the pandemic, Tapestry had 1540 retail and outlet stores under its three brands, with 414 stores in the United States. Tapestry employed approximately 16,000 people across the United States.
Tapestry suffered considerable losses due to the Coronavirus. When Tapestry filed its First Amended Complaint, at least 1,676 of its employees had confirmed they contracted COVID-19. Tapestry alleged that the Coronavirus was present in its stores. Given the high prevalence of infectious COVID-19 cases in Maryland, Tapestry argued it was statistically certain that Coronavirus droplets and aerosols were frequently dispersed into the air and on property in, on and around the Tapestry stores.
Tapestry had an all risk commercial property policy from Factory Mutual Insurance Company. Coverage was denied and Tapestry filed suit. Factory moved to dismiss Tapestry’s First Amended Complaint. In response, Tapestry asked the court to certify a question to the Maryland Court of Appeals asking whether a policy covering “all risks of physical loss or damage” was triggered when a toxic, noxious, or hazardous substance – such as COVID-19 – that was physically present in the indoor air damages property or causes loss of the functional use of the property?
Factory opposed the motion and noted that the court had previously denied a motion to certify a similar questions whether the effect of the Coronavirus on a property could constitute ‘physical loss or damage” to the property. In the court’s view, however, the prior cases were distinguishable because the policy language at issue was different and the prior cases did not include specific allegations that the insureds’ properties had in fact been contaminated by the Coronavirus. The court reasoned that a property could arguably be physical degraded – if only temporarily – by the existence of coronavirus in the air.
This case was appropriate for certification because there was no controlling appellate decision or statute on point. Therefore, the motion to certify was granted.