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Nevada Supreme Court Holds COVID-19 is not a Direct Physical Loss Covered by Property Insurance Policies

09.19.23 | INSIGHTS

By Andrew B. Downs
Shareholder, 415.352.2716

Last week policyholders discovered there is no silver lining in the Silver State when it comes to Business Income for COVID-19 related losses. The Nevada Supreme Court in Starr Surplus Lines Insurance Co. v. Eighth Judicial District Court, 139 Nev. Adv. Op. 32 (2023) joined the vast majority of courts which have concluded there is no Business Income coverage for COVID-19 related losses.

While the volume of COVID-19 Business Income litigation has dropped off substantially, policyholders continue to press their cases, particularly in the state courts. Starr Surplus, decided on September 14, is the first Nevada appellate case on the subject. The Nevada state trial courts have been relatively pro-policyholder on COVID matters.

The owner of a retail shopping mall on the Las Vegas Strip was forced to shut down abruptly in the spring of 2020 when the pandemic hit. It sought to recover its resulting losses from its property insurer, Starr, under a commercial property insurance policy. After the policyholder sued, Starr moved for summary judgment. The trial court granted part of that motion, but denied the remainder concluding “whether COVID-19, or the virus that causes it, does or does not physically alter property in order to trigger one or more coverages under the Policy is a matter of fact to be determined at trial.” Starr then petitioned the Nevada Supreme Court for a writ of mandamus to overturn the decision.

Following a lengthy discussion of the meaning of “direct physical loss,” the Nevada Supreme Court unanimously concluded the presence of the COVID virus was not a direct physical loss, explaining “Presence of a physical virus on the property, even if it ‘attaches to’ the property, does not give rise to the necessary transformative element of something like ‘fire, water, or smoke.’” The court also rejected the common policyholder “formite” argument is “unconvincing” because it does not demonstrate that the virus is harmful to the insured property.

Accordingly, the court reversed the trial court’s denial of summary judgment to Starr, stating:

The evidence, taken as true, demonstrates only economic loss sustained amidst a worldwide pandemic. Because such economic loss was not caused by direct physical loss or damage to the property, we would turn away from “the North Star of this property insurance policy” should we uphold the summary judgment denial under these circumstances.


The Nevada court also found the pollution and contamination exclusion applied because the definition of pollutant included viruses in that definition.

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