The state Supreme Court released two notable decisions today. The first is about insurance coverage of business income that was lost due to the state’s COVID shutdowns in 2020. The second is about where property tax refund cases must be filed.

1. COVID shutdowns did not trigger property insurance coverage of lost business income because the loss was not physical

Two dentists (referred to as “HS” in the decision) had property insurance that covered business income lost due to “direct physical loss of or damage to” their offices. They argued that their insurance should cover the business income they lost due to Gov. Inslee’s 2020 proclamation that restricted non-urgent medical procedures because “direct physical loss of or damage to” could “reasonably be interpreted to include the loss of the ability to use property or suffering the ‘deprivation’ of such property.”

In its decision, the Court notes,

HS is correct that it was kept from using its property as it intended. However, it is not reasonable to say that the Proclamation physically kept HS from using its property, especially when HS was using its property. . . . Under the Proclamation, HS was not able to use the property in the way that it wanted, but this alleged “loss” is not “physical.” It is more akin to an abstract or intangible loss than a “physical” one.

(Emphasis in original.)

The Court held, “It is unreasonable to read ‘direct physical loss of . . . property’ in a property insurance policy to include constructive loss of intended use of property. Such a loss is not ‘physical.’ Accordingly, the Proclamation did not trigger coverage under the policy.”

Additionally, the Court addressed the “efficient proximate cause rule.” Under the rule, when a loss has a mix of insured and non-insured causes, it is covered by insurance if an insured cause sets the other causes in motion. Noting that the issue of how COVID fits in this rule “is likely to reoccur,” the Court wrote,

COVID-19 initiated the causal chain that led to the Proclamation and the cause of any alleged loss of use of the property. Because the causal chain was initiated by COVID-19, we hold that the virus exclusion applies to exclude coverage and that the efficient proximate cause rule does not mandate coverage.

(The property insurance in the case specifically excluded coverage for losses caused by viruses.)

2. Property tax refund cases must be filed in the county where the tax was collected

State law includes two potentially conflicting venue statutes. RCW 36.01.050(1) (enacted in 1854) states, “All actions against any county may be commenced in the superior court of such county, or in the superior court of either of the two nearest judicial districts.” Meanwhile, RCW 84.68.050 (enacted in 1931) specifies that property tax refund cases “shall be brought in the superior court of the county wherein the tax was collected.”

In this case, a company brought a refund action in Thurston County Superior Court for property taxes it paid in Lewis County. Lewis County moved to change the venue pursuant to RCW 84.68.050.

The Court’s decision notes, “When both a general and specific statute potentially apply, we give effect to the specific statute unless there is some indication the legislature intended the general to govern.” Thus, the Court held that the “legislature intended tax refund actions to be litigated in the county that collected the tax.”