COVID-19 Business Interruption Insurance Coverage is Far from Settled in Pennsylvania
Needless to say, COVID-19 business interruption coverage has been a hot topic for insurers and policyholders alike. This past week, the Allegheny County Court of Common Pleas granted summary judgement in favor of policyholder plaintiffs and denied the defendant insurers’ motion for summary judgement in a class action lawsuit seeking coverage in Timothy Ungarean v. CNA et al. (further analysis here Only the Beginning? Pennsylvania Trial Court Finds Coverage for COVID-Related Business Losses). However, this opinion found no favor with the Eastern District of Pennsylvania.
In four consolidated cases, including MilkBoy Center City LLC v. The Cincinnati Insurance Co. et al. Judge Michael Baylson held that four local businesses, a bar, a catering service company, a roller-skating park and a gym, all failed to show that they incurred “direct physical loss.” Each had an insurance policy with Cincinnati Insurance containing identical language for trigger of coverage. Relying on Third Circuit precedent, Judge Bayslon held that, “policy language may not be stretched beyond its plain meaning to create an ambiguity.” Judge Bayslon also made note that the vast majority of federal courts have ruled consistently that coverage is not triggered by the COVID-19 pandemic and the resulting shut down orders due to the lack of “physicality.”
In the other case out of the Eastern District of Pennsylvania, Judge Wendy Beetlestone agreed with Judge Baylson. In Tria WS LLC et al. v. American Automobile Insurance Co., Judge Beetlestone found that the policyholder was unable to show a physical cause for their loss. Additionally, the court pointed to additional language in the policy to support its decision. “The terms ‘repair,’ ‘rebuild,’ and ‘replace’ strongly suggest that the insured property must have suffered some negative change in its physical condition rendering the property unsatisfactory and requiring restoration.”
Covid 19 decisions are obviously still not completely settled, and while the decision in Ungarean appears to be an outlier, until higher courts, including Circuit Courts and Supreme Courts begin to make their rulings on these issues, policyholder businesses and insurers are in a state of limbo.
Thanks to Ryan Geib for his contribution to this article. For more information on Covid-19 business interruption insurance questions, please contact Tom Bracken.