The judge wrote that, among elements of the policy language that needed to be analyzed, "the more challenging interpretive question is whether the restrictions imposed on the Plaintiffs' use of their premises count as physical loss."

In addressing the Society Insurance policy's requirement that there be a "direct physical loss" in order for business interruption coverage to apply, Chang noted in part that "Plaintiffs have not been able to use their premises as they did for indoor, sit-down [dining] service before the pandemic."

"These on-site service restrictions have caused most of the Plaintiffs' losses for which they seek business-interruption coverage" but, he wrote, "according to Society [Insurance] these losses are not 'physical' because tables and chairs, walls and floors, stovetops and sinks remain in good working order."

"But a reasonable jury," Chang wrote, "can find that the Plaintiffs did suffer a direct 'physical' loss of property on their premises.

"First, viewed in the light most favorable to the Plaintiffs, the pandemic-caused shutdown orders do impose a physical limit: the restaurants are limited from using much of their physical space," he wrote. He then said that "it is not as if the [pandemic] shutdown orders imposed a financial limit on the restaurants by, for example, capping the dollar-amount of daily sales that each restaurant could make. No, instead the Plaintiffs cannot use (or cannot fully use) the physical space."

He also wrote that "another way to understand the physical nature of the loss inflicted by the shutdown orders is to consider how a restaurant might mitigate against the suspension of operations caused by, say, a 25%-capacity limitation on the number of guests inside the restaurant. If the restaurant could expand its physical space, then the restaurant could serve more guests and the loss would be mitigated (at least in part). The loss is physical—or at the very least, a reasonable jury can make that finding."

In addressing the issue of causation—after noting early in his decision that the central business-interruption policy phrase at issue was "'caused' by 'direct Physical Loss'"—Chang wrote that "Society … argues that the Plaintiffs' businesses have been interrupted by the various state and local shutdown orders—not by the coronavirus itself."

He said that "to Society's way of thinking, even if the coronavirus and the resulting pandemic could qualify as a 'direct physical loss,' it is really the governmental orders that caused the suspensions of business, and those orders—as the superseding cause of the suspensions—do not qualify as a 'direct physical loss' under the policy."

But the judge wrote that "Society's characterization of the cause of the business interruptions is not supported by the governing law of the pertinent States, none of which impose such a strict causation requirement."

He added that "here, the Society policy does not purport to alter the proximate-cause standard."

"With proximate cause as the governing causation standard, a reasonable jury could find (at least on the factual record so far) that the novel coronavirus and the resulting pandemic proximately caused the business interruptions," Chang said.

Antonio Maurizio Romanucci of Romanucci & Blandin in Chicago represents one of the plaintiffs, Rockit Ranch Productions, listed in the docket for the multidistrict litigation before Chang, He couldn't be reached for comment.

But Adam Levitt of DiCello Levitt, who is co-lead counsel for the plaintiffs in the multidistrict litigation against Society Insurance, recently told Law.com's Amanda Bronstad for her "Critical Mass" newsletter that the ruling affected "the entire lay of the land" of about 40 cases against Society. As to cases against other insurers, he said the ruling was the first to address business interruption claims in multidistrict litigation.

"We believe that, in addition to being a strongly positive development for the plaintiffs and the proposed class in the Society MDL, Judge Chang's ruling should give any other judge pause before dismissing a COVID-19 BII case on the 'direct physical loss or damage' issue," Levitt told Bronstad.

Curtis Campbell at Brewer, Krause, Brooks & Chastain in Nashville, Tennessee, is helping to represent Society Insurance and couldn't be reached.