Pennsylvania Court Further Dilutes the Legal Landscape on Business Insurance Coverage During Covid-19
In MacMiles LLC v. Erie Insurance Exchange, the Allegheny Court of Common Pleas granted partial summary judgment in favor of plaintiff, a Pittsburgh tavern, holding it suffered “physical loss” because of the COVID-19 pandemic, and therefore entitled to reimbursement by its insurer.
Erie issued MacMiles (d/b/a Grant Street Tavern) an insurance policy providing coverage for any direct “physical loss or direct physical damage,” unless the loss or damage is specifically excluded or limited by the policy. After MacMiles was forced to close on Governor Wolf’s orders as it was a “non-essential business” in Pennsylvania, it submitted a claim for coverage to Erie, who thereafter denied the claim.
MacMiles sued Erie for breach of contract and declaratory judgment as to the business income protection provision of the policy. Then, MacMiles filed a motion for summary judgment arguing it suffered “direct physical loss or damage,” and therefore should be reimbursed because “direct physical loss or damage” includes loss of use of the tavern. Erie argued “direct physical loss or damage” requires some physical altercation or demonstrable harm to the property.
The court ruled against Erie holding the insurer did not define the terms at issue, and thus, the court must use the words’ ordinary meaning to ascertain the parties’ intent. Here, the court focused on the disjunctive “or” to find that MacMiles’ interpretation was reasonable if it either suffered “direct physical loss” or “damage.” The court accepted the definition of damage as “loss of harm resulting from injury to person, property, or reputation.” The court also defined loss as “destruction, ruin . . . [and/or] the act of losing possession [and/or] deprivation.” MacMiles suffered loss because it was deprived of business due to COVID-19 closure. Granting the policyholder summary judgment here was departure from the majority of Pennsylvania courts that have found in favor of insurers denying claims by restaurants for COVID-19 related business losses.
Thanks to John Lang for his contribution to this post. Should you have questions, please feel free to contact Tom Bracken.