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Federal Court In Pennsylvania Reaffirms No Coverage Without Direct Physical Loss

October 28, 2021

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<p style="text-align: justify;">Policyholders have largely been unsuccessful in convincing Federal courts to declare that coverage exists for business interruption claims as a result of the COVID-19 Pandemic. <a href="https://www.wcmlaw.com/wp-content/uploads/2021/10/Greenwood-Racing-Inc..pdf"><em>Greenwood Racing Inc.</em></a> operates Parx Casino, a horse racing and casino gaming complex in Bensalem, Pennsylvania and sought a declaratory judgment that would require its insurers to cover losses sustained by Greenwood and Parx as a result of the COVID-19 pandemic. Greenwood and Parx specifically fought federal jurisdiction as they apparently believed they may fare better in State Court. The insurers removed the case to federal court based on diversity, and Greenwood attempted to remand the matter back to state court. The District Court for the Eastern District of Pennsylvania sided with the insurers and held that the case would remain at the federal level.</p>
<p style="text-align: justify;">The Eastern District’s decision was based on three key points. First, the Declaratory Judgment Act provides the federal courts with broad discretion to accept or decline declaratory judgment proceedings like Greenwood’s. Second, there was no “parallel” state proceeding that would see the controversy between Greenwood and the insurers resolved in state court. And third, there was no “novel” issue of Pennsylvania law that would require a state court, rather than a federal court, to decide. The dispute over Greenwood’s financial losses due to the COVID-19 pandemic will proceed in federal court. Insurers should be aware that some plaintiffs may attempt to find warmer waters than those of Federal Court.</p>
Thanks to Jason Laicha for his contribution.  If you have any questions, please contact <a href="mailto:mcare@wcmlaw.com">Matthew Care</a>.

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