Look at virtually any Covid-19 case favoring an insurer, and you will find a citation to Section 148:46 of Couch on Insurance. It is virtually ubiquitous: courts siding with insurers cite Couch as restating a “widely held rule” on the meaning of “physical loss or damage”—words typically in the trigger for property-insurance coverage, including business-income coverage. It has been cited, ad nauseam, as evidence of a general consensus that all property-insurance claims require some “distinct, demonstrable, physical alteration of the property.” Indeed, some pro-insurer decisions substitute a citation to this section for an actual analysis of the specific language before the court. Couch is generally recognized as a significant insurance treatise, and courts have cited it for almost a century. That respect began with the first edition written by George Couch and subsequent editions written by his successors. This particular section, however, as formulated in the third edition of Couch, contains an unfortunate, and serious, error. Couch’s apparent conclusion—that “direct physical loss” requires a “distinct, demonstrable, physical alteration”—is wrong. It was wrong when Couch first made it in the 1990s, and it is wrong today. As another well-respected treatise puts it, “when an insurance policy refers to physical loss of or damage to property, the ‘loss of property’ requirement can be satisfied by any ‘detriment,’ and a ‘detriment’ can be present without there having been a physical alteration of the object.” In this Article, we address the history and development of the "physical loss" rule, Couch's distortion of it, and its impact on contemporary litigation. We also explore the correct rule, as explained in pre- and post-Couch precedent and in other treatises that more accurately state the law. Finally, we articulate the severe consequences that may follow for banks, businesses, and homeowners if Couch's test, in fact, becomes "widely accepted."
