About a year ago, we wrote about property insurance coverage shrinking as a result of the COVID-19 pandemic. We focused on how the near universal opinion of courts that COVID-19 and the coronavirus did not cause insured “physical loss or damage” contradicted the majority rule prior to the pandemic, and how that view of COVID-19 might creep into decisions involving other risks of loss, risks of loss that otherwise had triggered coverage prior to the pandemic, such as asbestos fibers, ash, soot, fumes, and ammonia, to name just a few. And we noted insurers had been trying to use those insurer-friendly decisions to limit or eliminate coverage for risks they knew they had insured just a few years before, and for which they continue to charge and collect premium.

A recent majority decision of the United States Court of Appeals for the Eighth Circuit pushes back against that trend. In Maxus Metropolitan, LLC v. Travelers Property and Casualty Insurance Co., the court considered whether damage caused by a fire at the policyholder’s large multi-building apartment complex was covered under the first-party property insurance policy it purchased from its insurer, Travelers. The policyholder won a $27 million jury verdict, which Travelers appealed. 

The Eighth Circuit “first address[ed] Travelers’ contention that it was entitled to judgment as a matter of law because Maxus failed to prove that the presence of microscopic soot … constituted a ‘direct physical loss of or damage to’ property as required under the policy.”  Slip op. at 7. Sitting in diversity, the court observed that “Missouri courts ha[d] yet to address whether or when the presence of microscopic soot might constitute physical damage,” but noted “they ha[d] provided some guidance” in a case seeking coverage for losses arising from the COVID-19 pandemic. Id. And in that context, the court in BBX Capital Corp. v. Scottsdale Insurance Co., 713 S.W.3d 590, 595, 603 (Mo. Ct. App. 2025) “held that a policy’s requirement of ‘direct physical loss of or damage to’ property, meant the loss or damage must be ‘directly material, perceptible, or tangible.’” Maxus, slip op. at 7. The court in BBX further held that “COVID-19 contamination was not covered damage because it did not cause a ‘physical alteration or tangible impact to’ the insured property.” 713 S.W.3d at 605, quoted in Maxus, slip op. at 7. The coronavirus was thus unlike asbestos “because ‘released asbestos fibers are a form of contamination that is permanent absent some intervention.’” Id. (quoting BBX, 713 S.W.3d at 606). The jury instruction in Maxus was “also in line” with BBX,” as it instructed “the jury that ‘direct physical loss of or damage to’ should be understood to mean that ‘the property has suffered some physicality to the loss or damage to the property—e.g., a physical alteration, physical contamination, or physical destruction.’” Id. at 8.

Against that backdrop, the Eight Circuit held:

Here, a reasonable jury could find that soot contaminated [the policyholder’s buildings]. “Contaminate” may be defined as “to soil, stain, corrupt, or infect by contact or association.” Webster’s Third New International Dictionary 491 (1981). Maxus presented ample evidence regarding the presence of soot throughout Phases 1-4, as well as regarding the extensive remediation procedures that were required to remove the soot. Cf. Olmsted Med. Ctr. v. Cont’l Cas. Co., 65 F.4th 1005, 1010-11 (8th Cir. 2023) (pointing out that COVID-19 contamination could be removed by “routine cleaning procedures” or would “dissipate on its own in a matter of days, if not sooner”).

Travelers does not dispute that soot was present in [the policyholder’s buildings] but instead argues that the presence of microscopic soot is not “physical” damage unless the soot is visible or affects the object’s structural integrity.  This goes beyond Missouri law. Soot damage—like asbestos damage and unlike a virus—is both “directly material, perceptible, or tangible” and “permanent absent some intervention.”  See BBX, 713 S.W.3d at 603, 606; see also Creative Consolidation, LLC v. Erie Ins. Exch., 311 A.3d 902, 908 (D.C. 2024) (contrasting COVID-19 virus with smoke that leaves “tangible parts of ash and soot on surfaces or in HVAC systems”).

Id. Finally, the court distinguished the dissent’s concern that the remediation done by the policyholder was not necessary because the policyholder failed “to present evidence that the soot made remediation necessary by creating a risk of future physical deterioration or by posing a health hazard.” Id. at 8-9. The court found, however, that Travelers did not itself raise this issue, nor did it object to the jury instruction on this basis. Accordingly, the court held there was “[s]ufficient evidence … to support the jury’s verdict.”  Id. at 9.

The decision in Maxus on whether soot caused “direct physical loss or damage” was not extensive or incredibly well reasoned. Indeed, the court seemed to be primarily animated by stemming the tide of precisely what we wrote about a year ago, which was the potential accretion of COVID-19 decisions to other risks of loss that had been insured prior to the pandemic. But by standing its ground, the court at least gave some succor to policyholders that the vast pre-pandemic jurisprudence on the meaning of “direct physical loss or damage” would not be completely undermined by the overwhelming majority of decisions that somehow held coronavirus did not cause physical loss or damage to property.