Only the Beginning? Pennsylvania Trial Court Finds Coverage for COVID-Related Business Losses
In a possible preview of things to come, in Ungarean v. CNA and Valley Forge Insurance Company, the Allegheny Court of Common Pleas ruled in favor of a Pittsburgh area dentistry, finding its COVID-related business losses were covered.
Ungarean sought coverage for business income, extra expense, and civil authority coverage. Following the denial of the claim, he filed a declaratory judgment action seeking coverage.
On summary judgment, the insurers argued that the policy required damage to the property for coverage to apply. However, the Court disagreed with the insurers reading of the policy’s provisions as requiring a showing that the policyholder suffered a harm “caused by direct physical loss of or damage to property at the described premises.” Rather, in examining the policy through its plain meaning, the Court found that the provision should be read as distinct parts rather than as a whole. As such, the Court found that the provision included harms due to “direct physical loss of” or “direct physical damage to property”, and the provision did not require actual damage to property in every instance. Thus, the Court determined that Ungarean suffered a direct physical loss of property and coverage applied.
The Court also found that civil authority coverage applied. The insurers argued, in part, that civil authority coverage did not apply because Governor Wolf’s shutdown orders did not completely bar Ungarean or its employees from entering the property or from performing emergency procedures. The Court disagreed, writing that the insurers’ interpretation was overbroad. Rather, the Court in reading the policy as a whole, found to the Court’s “primary focus” to be the “extent to which the action of civil authority prevented the insured from accessing its premises in a manner that would normally produce actual and regular business income.” Thus, the Court determined the civil authority provision did not require that all forms of access be prevented for coverage to apply.
Finally, the Court did not find that any of the policy’s exclusions applied. Notably, the Court dismissed the insurers’ argument that the policy’s contamination and microbe exclusions precluded coverage. As to contamination, the Court held that the loss did not occur from direct contamination from COVID. Rather, the loss occurred due to the threat of person-to-person transmission of the virus. As to the microbe exclusion, the Court noted that while the policy exclusion included “fungi, wet rot, dry rot, and microbes”, it did not include viruses, writing “If defendants wanted to exclude viruses, why not simply use the word virus explicitly in the insurance contract?”
This decision is sure to be appealed and Pennsylvania law on these issues remain unsettled as the myriad of cases involving similar claims move forward. Nonetheless, this case demonstrates that the court’s will continue to rely upon the plain language of the policy in analyzing these claims.
Thanks to Benjamin Ferrell for his contribution to this post. Please contact Heather Aquino with any questions.