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The U.S. District Court for the Northern District of Texas has granted an insurer’s motion to dismiss a policyholder’s third amended complaint, holding that the policyholder failed to plausibly plead that it suffered a direct physical loss or damage so as to trigger coverage under the policy. The case is Vandelay Hosp. Grp. LP v. Cincinnati Ins. Co., Civil Action No. 3:20vv-1328-D, 2021 U.S. Dist. LEXIS 129806 (N.D. Tex. July 13, 2021).

In a fact pattern we have seen time and time again in the wake of the pandemic, this action stemmed from government-mandated shutdowns in Texas beginning in March of 2020. Vandelay Hospitality Group LP (Vandelay) was insured by The Cincinnati Insurance Company (CIC) with an “all-risk” commercial property policy. On March 23rd, Cincinnati’s agent submitted a reservation of rights letter to Vandelay, stating that COVID-related damages were not direct physical losses and were not covered under the policy.

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